Warning on re-emergence of vertical integration from QAR
The organisation representing AMP financial advisers is calling for “guardrail” to be put in place to prevent the Quality of Advice Review (QAR) recommendations giving rise to the emergence of vertical integration.
The Advisers Association (TAA) has specifically pointed to the potential for the QAR recommendations related to non-relevant providers giving ‘good advice’ as creating the potential for a re-emergence of vertically integrated financial services models.
TAA chief executive, Neil Macdonald said that while his organisation broadly supported the QAR recommendations it believed great care needed to be taken before implementing some of them “or we may face a back-to-the-future scenario that did not serve Australians well”.
He said the guardrails should be around who should be permitted to deliver personal financial advice, the extent of the advice they give, the minimum education and qualifications they hold and the obligation to provide ‘good advice’.
“It is very clear, particularly as a large per centage of the population nears retirement, that we need to enable more people to give personal financial advice,” Macdonald said. “But while the advice profession continues to debate what the future should look like, industry funds have continued giving advice and are taking over the role previously played by the banks.”
However, he said the relatively low Statement of Advice (SOA) production from the industry funds sector appeared to indicate that general advice is being provided, where personal advice is likely required, especially in preparation for retirement.
“There is a world of difference between giving people general information and giving them personal financial advice that meets their needs,” Macdonald said “‘There is also a risk that general advice will continue to be provided instead of ‘good’ personal advice, and that doesn’t address the issues of the past.”
He said the QAR recommendation to expand the definition of personal advice to require non-relevant providers to provide ‘good advice’ represented a very important consumer protection that had to be enforced if there was to be no Best Interests Duty.
“If it is not, then complex retirement advice could easily be provided to members of a super fund, without any consideration of issues that profoundly impact consumers in retirement – for example, Centrelink benefits, who and when to move to pension phase, etc,” Macdonald said.
“Emergence of vertical integration”???
It is a bell ringing endorsement along with conflicted rem, cross subsidisation and poorer client outcomes.
Regular Joe’s and Jane’s need advice but this structurally corrupt system is union funds reward for helping labor win govt.
The structural corruption sickens me.
This is something that a lot of people seem to think is not going to happen.
But based on the recommendations from QAR.
A Bank’s New CEO with the Royal commission a distance memory of 5 years ago maybe, say 7 years. Go on spending spree and buys an insurance company and Fund Platform. Now as Bank Products they are able provide advice but this time they flood their branches with “Financial Consultants” or maybe a Fancy “financial Concierge” Who are not qualified nor liable for their advice, do not have compliance requirement just sales targets.
Welcome back to 2002. The Bank provides “free Financial advice.” with No Liability Who is going to cover all the compensation case, oh that’s right the banks are not liable. (The bank would run the Financial Team at a loss, but this would be more than compensated by the inflows from funds under management and new insurance policies
It will take only one Bank to start this, and the flood gates would open and this time the Bank will have no Liability and get exactly what they want.
vertically integrated channel with no advice and no liabilty.
While I do not believe this is what Ms. Levy is looking to do, she has not discussed this with people with experience in this area and human nature.
While some people do not believe this will happen, it is amazing how history can repeat itself
The Industry Funds who have campaigned for years against the advice industry, and knocked out their major competition (i.e. The Banks) now want to take on the role of advisers.
They are not qualified to do so, and a single product provider that only supplies one super product( i.e. which is the essence of Vertical Integration) should not be allowed to simply direct all clients that come there way to their one super product. That is NOT Financial Advice.
That is a corrupt practice, unethical, and the biggest conflict of interest this countries financial system has ever seen. It will be an unmitigated disaster.
Super product providers should never be allowed to also call themselves advisers. It’s a clear unethical Conflict of Interest.
Let’s not forget that this is the exact reason that the Industry Fund lobby groups pushed the banks out of the business. Now they want to jump right into their shoes to reap massive profits.
I would say that the lawyers will now be gearing up to sue the government for allowing such a blatant conflict of interest to occur with the retirement savings of every day Australians. If the government allow this to occur they should hang their heads in shame.
The industry funds will be given a free pass to rip off the super funds of retirees, and the banks might then decide again to join the party.
If the government think we are blind to these corrupt actions they need to wake up. We are not that stupid.