Advice firm warns against reopening the product-flogging floodgates
The Quality of Advice Review (QAR) needs to deliver adequate safeguards around the provision of ‘personal advice’ by financial institutions or risk “the floodgates to product flogging by institutions being thrown wide open”.
Financial planning business Tribeca Financial has told the QAR that “it is vitally important that personal financial advice continue to require the taking into account of relevant circumstances relating to the advice being sought”.
And in similar manner to the FPA, the Tribeca submission pointed to the manner in which licensees utilised the existing regulatory environment to protect their interests.
It said the current requirements around the provision of ‘personal advice’ are “clear – very onerous, but clear”.
“AFSL’s hide behind the excuse of uncertainty to place risk-averse policies and procedures in place for their AR’s and customer support staff,” it said. “This enables them to avoid giving personal advice where the cost to provide that advice at the standard required by law and the Code of Ethics significantly outweighs the benefit of the advice if it were to be provided.”
“They know where the line between personal and general advice is and make commercial decisions not to cross it or even lean up against that line. Further, AFSL’s fear the look-back risks that ASIC can and do apply, and therefore conservatism reigns in AFSL decision making.”
The Tribeca submission said that the firm agreed that the provision of more personal advice would be positive but stressed that there have to be limitations applied to non-relevant providers.
It said that the QAR proposals appeared to point to there being no constraints on the type of advice an unqualified employee of a product issuer could provide “as long as the outcome can be deemed good for the client”.
“We note the supposition that product providers and trustees will self-regulate their non-relevant providers to only provide personal financial advice in only ‘simple’ advice situations, and that it is expected that they will adequately train and supervise their employees,” the submission said.
However it added, “This requires a significant leap of faith given the poor past-behaviours of Australian financial services corporations. Future failures on their part will impact ALL providers of personal financial advice including the fully qualified, registered relevant providers. We have seen this over the last 10 years where substantial corporate wrong-doing tarnished self-employed financial advisers”.
Frydenberg & LNP employed Ms Levy to find solutions for the Banks & Super Funds to FLOG LOADS OF PRODUCT WITH NO ADVICE AND KEEP REAL ADVISERS TIED UP IN BS RED TAPE COMPLIANCE.
Ms Levy has done exactly what Frydenscum & LNP asked.
ANOTHER LNP DISGRACEFUL ADVISER ATTACK ALL FOR THEIR BANK BUDDIES.
I can’t believe that the dust hasn’t even settled and we are considering entrenching vertical integration back into the funds management industry.
This the biggest source of all the resultant carnage, stress and career destruction that has hurt clients more than it has helped has been vertical integration.
So if this gets up we have two choices. Maintain professionally trained and experienced staff so we can charge clients a fee directly. Or we set up our own products, charge fees to clients through the products (that we now own) and set up a call centre in a second world country after a two week training course.
I honestly can’t believe this is being recommended and the proponents holding a straight face.
I wonder which business model will provide scalability and more profitability and which one will benefit the client of the business?
Union funds and banks must be licking their chops
In the recent webinar with Conexus, Michelle Levy said that her proposal to open up the ‘floodgate’ to product providers was her most viable option to provide affordable and mass-scale advice (the other 2 options are Financial Advisers (declining and limited numbers) and Government (no one would like this given we prefer free markets solutions, and policies have already failed us in the past). If the proposals were to be in force, it will be interesting to see the difference between ‘Good’ advice between product providers versus Financial Advisers. I guess the free markets will decide who to be with.