Agree or disagree, Levy delivered a balanced assessment
ANALYSIS
While plenty of financial advisers have expressed reservations about elements of Michelle Levy’s Quality of Advice Review (QAR) final report, on balance, she has paved the way for some key and long overdue changes to the financial planning profession.
When viewed against the array of reports delivered to the Federal Government over the past two decades, the Quality of Advice Review is mostly sensible and pragmatic and reflective of the fact that Levy did consult widely before delivering the completed document to the Assistant Treasurer and Minister for Financial Services, Stephen Jones.
Many advisers who are readers of Financial Newswire have made clear they disagree with Levy, particularly with respect to general advice and intrafund advice, but those are just two elements of a very broad-ranging document which, in any case, will be cherry-picked by the Government.
Unlike the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Levy’s final report will not be rubber-stamped by the Government. Indeed, a number of the final recommendations may never move beyond the pages of the final report.
What is more, a number of the recommendations also need to be weighed against the work undertaken by the Australian Law Reform Commission with respect to the Corporations Act – something which will take time.
The Financial Planning Association (FPA) and the Association of Financial Advisers are right to urge the Government to deliver some “quick wins” in circumstances where those wins can be achieved by simply rolling back unnecessary regulation around ongoing fee consent and arrangements around statements of advice (SOA).
Except for the fact that there are sections of the Government which are philosophically opposed to commission-based remuneration, it should be equally easy for the Government to accept Levy’s recommendation with respect to the future of the Life Insurance Framework (LIF).
It is clear the Government is in no particular hurry to implement the QAR with Jones having flagged a further round of consultation – something which is unlikely to be completed until the middle of the year and certainly not before the May Federal Budget.
It is via those consultations that advisers need to be vociferous in arguing for changes to the elements of the Levy’s recommendations with which they disagree.
In the meantime, measured against exercises such as the Future of Financial Advice (FoFA), there is reason to be grateful for the level of balance delivered by Levy.
Levy has struck a balance between quality of advice, and quantity of advice. But the review wasn’t supposed to be about quantity of advice!
Levy’s recommendations to allow product providers to give advice via untrained, unlicensed staff not bound by the consumer protections that apply to licensed advisers, will increase the quantity of advice. But that approach is contrary to consumers’ best interests. Consumer’s interests are served by unburdening licensed advisers from excessive regulation that adds unnecessary cost and complexity to the advice process. The focus of the review should have been solely on fixing the current bad regulation, not providing carve outs from it for product companies.
Balanced hey Mike, how so ?
Real Advisers, real education, real qualifications, real compliance, real Fee disclosure & consent both upfront and ongoing annually, 40hrs CPD pa, real research and Real Advice in the clients Best Interest.
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Product Providers with call centre jockeys that are uneducated, unqualified, less or zero compliance, No Fee consent upfront or ongoing annually as it will be bundled into Admin fees that all members pay when most get no service, 0hrs CPD pa, no research as only flogging vertically owned products that will not be Advice but simply a product flog that Does NOT have to be in clients Best Interest.
Mike please explain how in anyway that is balanced ?
Mike please explain how balanced it is that the Real Advice profession has 10 times the disclosure and compliance obligations v product floggers ?
Eg. Let’s keep Real Drs jump through all the massive existing education, training, ethics and compliance.
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Drug companies selling prescription medicine via call centres diagnosed and prescribed by uneducated, unqualified backpackers.
Sounds balanced hey Mike?
Mike would you be going to the Real Dr or the Drug company call centre?
Mike, this is a spot on analysis. This is one inquiry where almost all of the recommendations were positive for financial advice.
The QAR was always going to be a package of reforms, and yes the former Government who initiated the report, made it very clear that it was about not just the quality of advice, but also access and affordability of advice. As soon as we publicly started to oppose it, or elements of it, we undermined the achievement of the whole. Sadly, as a sector we have fallen into the same old trap of squabbling about what we want and what we don’t want, making it easier for the Government to resist making fundamental reforms. If we end out getting very little, then we only have ourselves to blame.
At the core of this disagreement is the apparent obsession that some in the advice sector have that financial advice can only be provided by fully qualified financial advisers (those on the FAR). We need to wake up to two important realities. Firstly there are not enough advisers to meet the financial advice needs of all Australians. Secondly there are already lots of people who are providing financial advice who are not fully qualified, and I am talking about those who are licensed (not the unlicensed and influencers). There are already those who provide general advice, which will largely disappear under the QAR recommendations, and those who provide advice to wholesale only clients (both are growing). We do not live in a perfectly pure world now, and we should never expect to be able to live in a world in the future where the provision of all forms of financial advice, from the most simple to the most complex, can only be provided by those who are fully qualified and on the FAR. Is that really in the interests of everyday Australians for whom poor financial advice could make such a big difference?
The time has come for the advice sector to approach this issue with maturity, have a sensible internal debate and then present a strong and united front to the Government. We all have a role to play in this.
Flogging a product via a vertically owned uneducated, unqualified call centre jockey is NOT Advice.
Real Advisers are not saying that products can’t be sold by Banks, Super Funds, Life Companies, etc, but don’t call it Advice.
What the product manufacturers provide is PRODUCT INFORMATION AND PRODUCT FEATURES. Let them flog all the product they like but Do Not in any way use the word Advice.
General Advice = PRODUCT INFORMATION, it’s not Advice.
If they are “not fully qualified” how did they become licensed.
Furthermore, no one here has said that advice should only be provided by relevant providers. My interpretation is that there is a clear distinction being made between relevant provider (i.e. individual financial adviser) and body corporate/super trustee with the latter being able to inflict greater harm to retail clients (remember AMP charging dead people) yet have no statutory best interest duty. If this is changed them I’m all in the proposed reform. How’s that for balance, Fact Check?
Does anyone have a direct line to Jeff Morris. I’d be interest to know what his thoughts are considering he blew the whistle about CBA’s misconduct.
To clarify – people who provide general advice and advice to wholesale only clients are licensed under ASIC, they are however, not subject to the education and professional standards requirements that apply to financial advisers. Secondly, whilst we might want the definition of advice to change and be limited to financial advisers, at present it is based upon a recommendation or statement intended to influence a person’s decision in relation to a financial product. That is what providers of general advice are doing as are those who work in the wholesale only client space.
The provision of financial advice by a non-relevant adviser could be provided by individuals, however they cannot be paid for the provision of the advice and they would be bound by a good advice duty. Michelle Levy has framed that as a duty that includes the requirement that the advice is “fit for purpose”, which is one of the tests that ASIC applies to the provision of financial advice in Regulatory Guide 175. They would not be operating in an environment without requirements and rules as has been suggested by some.
Why then should we not have all participants and stakeholders who are licensed in any form of financial advice be required to meet a statutory best interest duty? I’m failing to understand your logic. Surely, ASIC make an assessment of those who hold general and wholesales licenses to determine if they meet some form or standard before issuing them with such a license. This only plays in favour to my argument that all advice should meet a best interest duty.
“The provision of financial advice by a non-relevant adviser could be provided by individuals, however they cannot be paid for the provision of the advice and they would be bound by a good advice duty”
You don’t think this was designed for super funds so they can just collectively charge their members in the form of a percentage based admin fee, and then not have to charge the client a direct fee? This then negates any requirement to give good advice. You are happy with that?
In addition, how many people do you think will actively seek out advice? If the compliance requirements are easier for qualified, licensed financial advisers then theoretically they can provide much more advice to consumers. Whether its one off advice, simple advice, etc it wont matter. Advisers can then go from servicing 150 clients to 500 clients if needed, depending on what your service offering is. 5 million people requiring advice is only 250 clients if there are 20,000 advisers. I am assuming that making financial planning a more lucrative career (through less compliance) would increase the number of qualified advisers in the industry too. If Ms Levy is worried about the number of people needing advice, then maybe she should look to grow the number of qualified advisers!
This is a great idea and demonstrates precisely why they should have appointed practising advisers to the Quality of Advice Review panel.
Fact check you are hilarious!! “however they cannot be paid for the provision of the advice”. So these call centre jockeys will be volunteers??? Just because they are not paid directly from the client account doesn’t mean that the client (and all the other union fund muppets) won’t pay from their collective accounts via fund fees.
Where do you think the money comes from??? The money still gets to the backpacker (I mean adviser). This just window dressing BS.
The proposed playing field is set to become less fair than it is right now.
This report is idiocy of the highest order.
@Mike Taylor – how could you get your interpretation so wrong. I expected that you would have had a better grasp on things.
Mike Taylor you have just lost all credibility in my eyes by calling this report balanced. Are you for real?
You seriously think it’s Ok for a bias Product Manufacturer(i.e. Industry Funds) to also provide Retirement Advice. Did you learn nothing from the Royal Commission?
We can all see what’s going on here, and in my opinion we need a Royal commission (RC 2.0) into these product floggers who escaped any scrutiny in (RC 1.0). It’s about time we put our focus squarely onto these superannuation product manufacturers who have spent the last ten years running advisers and ARs into the ground, and now want to become a pseudo adviser with no restraint, education, or ethics whatsoever. This report is a slap in the face for advisers and the actual advice industry.
The product flogging industry funds are not more than 10% of the comprehensive advice world despite the fact they are aloud to hoard a large percentage of public super funds, and charge exorbitant fees for doing next to nothing in the way of actual advice for there clients. Talk about fee for no service. The government and their clients need to take a serious look at what there actually getting for there money. Very little is the answer. Making advice a free for all to a super product manufacturer is not the answer. Enabling professional, well trained, and ethical advisers is the answer.
Shame on anyone supporting a return to product flogging domination of the advice industry. It seems the government still don’t understand that product floggers should not be leading the discussion around ‘financial advice reform’. The industry funds are not financial advisers and should never be allowed to cross over into this unethical position. Haven’t we just spent the last 5 years increasing the ethics of our profession? Why is the government taking us back to the dark ages? There’s very little difference between the influence the banks had on super, and the industry funds. They are both superannuation product floggers.
Sorry, there’s no balance here.
It is one rule for advisers and another for peddlers, who are basically one step up from finfluencers because they are employed by banks and industry funds.
The financial advice “industry” is having its strings pulled by vested interests, including banks, unions, and the Labor (union) government.
It continues to lose it’s way while being dragged down the road by it’s nose without any real say.
Financial advice remains an ‘industry’ and will never amount to a profession.
It will be in the bin within years, and all advice will go through banks and union funds. if not just AI robots!