Good advice duty to remove ‘clunkiness of bureaucracy’

Speaking at the Stockbrokers Conference in Sydney this week, Michael Mathieson, senior regulatory counsel at Allens, said he was a “big fan” of the recommendations derived from the Quality of Advice Review (QAR), but denied the presence of bias.

“I’m a big fan of the recommendations, and not just because Michelle [QAR reviewer] is a colleague,” Mr Mathieson said.

Delving particularly into Michelle Levy’s recommendation regarding personal advice, her colleague Mr Mathieson explained that even if more advice is characterised as personal advice as a result of that particular recommendation, “a lot of clunkiness of bureaucracy” will simply be “swept away” with the good advice duty.

He opined that the good advice duty “should be a better duty” for both the recipient and the giver of the advice.

The first recommendation in the QAR final report states: “The definition of personal advice in the Corporations Act should be broadened so that all financial product advice will be personal advice if it is given to a client in a personal interaction or personalised communication by a provider of advice who has (or whose related body corporate has) information about the client’s financial situation or one or more of their objectives or needs”.

Recommendation four then says an individual providing personal advice to a retail client has an obligation to provide good advice.

“A duty to give good advice is not intended to be a duty to give ‘okay’ advice or ‘good enough’ advice,” Ms Levy said earlier this year when addressing concerns that a prospective good advice duty would lower the quality of advice due to misinterpretations of the “good” standard.

On personal advice, Mr Mathieson clarified that advice will only be treated as personal if the recommendation is personalised.

Going back to Ms Levy’s report, Mr Mathieson offered an example.

“She said, consider two recommendations. The first one is ‘I recommend that you buy share X’, or ‘I recommend that you buy share X if you’re looking to buy any share to add to your portfolio’.

“So, the first one requires consideration of a person's financial circumstances. The second one is a generic recommendation and so there will be a lot of stock recommendations that will be able to be given that wouldn’t require the broker to go and find out that bit of financial information that’s sitting with the banks.”

Once the advice provider has determined that they are offering personal advice, Mr Mathieson explained they would then move onto to determining what the good advice duty requires.

Joining Mr Mathieson on a panel, Maria Lykouras, CEO at NAB-owned wealth manager JBWere, also praised the QAR and said it has the potential to elevate professionalism in the industry.

“I love what Michelle’s done. I think if we can implement the Quality of Advice Review recommendations, we will go back to something where we’re relying on professionals who make judgement, who can deal with the complexity of the client that’s in front of them, that they’re able to provide good advice based on what they know, what they’ve learnt, their experience and the focus on ethics that we now have in the industry,” Ms Lykouras said.

“And if we can implement those changes, we can move away from 90-page documents that no one cares about or reads to something that actually tells the story to the client of what the true advice is that they are receiving.

“And if we can have that flexibility to do that, we as an industry will be in a much better place and so will our clients”.

Earlier this week, Financial Services Minister Stephen Jones confirmed the government is due to publicise its response to QAR shortly.