‘Personal advice’ captures too much
Much market-based investment advice should not be regarded as personal advice because it is not reliant on any particular objectives or goals, according to the Association of Securities and Derivatives Advisers of Australia (ASDAA).
The treatment of a broad swathe of advice as personal advice was something which was making it expensive, the ASDAA said in a submission responding to the Quality of Advice Review (QAR) proposals.
“In providing market-based advice, an adviser takes into consideration general market information (such as, market research, company data, economic statics and information) to put together a portfolio of assets that are likely to generate capital growth and/ or income for the client,” it said.
“The argument to date has been that this type of advice is considered personal advice. However, the reality is that in most cases it is not, as the portfolio set up for the client is the same, if not similar, to that recommended to other clients the financial adviser works with, as the recommendations the adviser makes are formulated on their opinion of the markets. It is not reliant on any particular objectives or goals of the client other than they want to make money,” the submission said.
“This is the core of the argument as to why financial advice is expensive because most people seeking this type of advice are unable to access it as the red tape and regulatory burden makes it too expensive and the liability associated with providing personal advice in this sector is so high (eg. a lot of clients blame an adviser for incurring losses when the markets go down) that advisers and firms are not willing to take the risk and provide such advice to clients.”
“The end result is that clients are unable to access the advice they seek,” the submission said.
“This is where change is required and the proposals in the (QAR) paper do not address these requirements. In fact the proposed changes will cause more consumer harm (ie. increased cost of advice) and make advice within this sector less accessible as merely having knowledge of a client’s portfolio assets or the amount of money they have to invest will be captured by the proposed definition of personal advice due to the wording ‘any aspect of their financial situation’.”
“In the proposal the emphasis is on the provision of good advice. To achieve the proposed outcomes one of the proposals is to change the definition of personal advice to be ‘broader so that it is clear it applies whenever a recommendation or opinion is provided to a client about a financial product (or class of financial products) and, at the time the advice is provided, the provider has or holds information about the client’s objectives, needs or any aspect of their financial situation’,” the submission said.
“The problem is that almost all advice would, under the proposed definition, be personal advice and this in itself will not result in achieving an environment where good quality and affordable advice can be provided. The cost of providing advice (including the risk associated with providing advice) versus the amount that consumers are prepared to pay under the current circumstances and the proposal are not likely to align.”
Which is why we need to get rid of the Annual Fee Renewal Consent Form red tape doesn’t exist in any nation on earth, except in Australia