‘Best advice’ just a lawyer’s picnic

Changing the current financial adviser best interest duty to a ‘best advice” concept could open the way for a lawyer’s picnic, according to the Association of Independently Owned Financial Professionals (AIOFP).

AIOFP executive director, Peter Johnston has even gone so far as to suggest that the chair of the Quality of Advice Review, Michelle Levy, as a lawyer, should have known this.

He reinforced that the AIOFP had always been in favour of the best interests duty remaining in place with the ‘best advice’ proposal being a flawed and poor outcome for consumers.

In a message to AIOFP members, Johnston claimed that “Unlike a ‘best interests duty’ which is specifically about acting in the best interests of consumers through a retrospective prism, the question of what is ‘good advice’ is subject to other considerations greatly complicating the response.

“The notion of ‘how long is a piece of string’ comes to mind,” he said.

“‘Good advice’ must be considered in the context of the circumstances of the specific consumer, the requirements of the specific consumer and the specific research applied to the advice given to decide whether the advice is ‘good’ or not.  “

The Oxford definition of ‘good’ in the context of financial advice is ‘financially secure, sound or safe’ all nice sounding words but in reality, the Institution/Adviser must ultimately be able to justify their decision in the courts if challenged.

Johnson said this legal conjecture is not consumer friendly and exactly what the Institutions and the lawyers want – “a long expensive legal battle with each claim to deter consumers from initiating any action”.

“This ‘lawyers’ picnic/snout in the trough’ scenario is what the ALP wanted to avoid with the 2012 FOFA initiative of a best interests duty, why would you want to bring back the ‘bad old days’ of Institutional product failures where they are not held to account due to the expensive and convoluted process?” he asked.

“We suggest the most consumer friendly path is to give Institutional/Superannuation staff exemption from the Corporations law to give factual information about their own internal products to consumers, anything outside of this they must comply with the current Laws and be held to account for the performance of their own products.”