QAR could set clock ticking to another Royal Commission

Mike Taylor

Managing Editor/Publisher, Financial Newswire

30 September 2022

A number of the proposals of the Quality of Advice Review (QAR) are setting the financial planning profession up for another Royal Commission in a decade or so to “unpick why so many retail investors got solid products by institutions, apparently under the guise of advice.

That is the assessment of the Institute of Managed Accounts Professionals which has echoed the concerns of a number of financial planning firms that there is a danger that the proposals outlined by QAR chair, Michelle Levy, could open the floodgates to institutional product-flogging.

In outlining his organisation’s submission, IMAP chair, Toby Potter acknowledged some good points in the QAR proposals but then pointed to its shortcomings, including that there is no definition of what is ‘good advice’ and the danger that it will be left to the Australian Securities and Investments Commission (ASIC) to fill in he gaps.

“Good advice’ isn’t defined in the consultation paper,” Potter’s outlined said. “And the process of determining what it is, probably by ASIC, at best will leave it looking very like the current safe harbour steps.”

“The process of defining it is likely to result in heavy institutional lobbying of ASIC for something substantially less than the current Best Interest Duty,” his outlined claimed.

“Michelle Levy misunderstands how quality services are created. She says that the current regime addresses process not outcomes. However, that’s actually one of its strengths – ask any athlete whether they set records by ‘just doing it’, or whether great outcomes are a result of good process rigorously applied. Best Interest Duty is a principles-based approach to process and we believe it works.”

“Michelle Levy’s proposals leave individual advisers still subject to the Code of Ethics with all the constraints that imposes, but removes those constraints from organisations that don’t even have to meet a ‘good advice’ standard; and

“Michelle Levy’s proposal to allow super funds to levy all members, so they can provide ‘free’ advice to a select few, is the very definition of ‘fee for no service’. The proposal represents a retrograde step for the provision of advice;

“The advances over the last decade towards professionalism amongst advisers appears to count for little; and

“Advisers will be operating in an environment where institutions can provide something that looks like free advice but without being obligated to meet the same standards as personal advisers;”

“These recommendations set us up for another Royal Commission in a decade or so, as we try to unpick why so many retail investors got sold products by institutions, apparently under the guise of advice.”