‘Banks will always put profits first’: FBAA slams QAR announcement

Peter White, managing director of the FBAA, a national association for finance and mortgage brokers that represents more than 11,000 members, said the move has the “potential to backfire”.

“The FBAA is concerned about the announcement that the federal government is introducing a new class of financial advice provider that will allow employees of banks, insurers, and other financial institutions to provide advice under the title of ‘qualified advisers’,” Mr White said.

“This presents more questions than it does provide solutions and has the potential to backfire.

“We know financial institutions and banks will always put profits first, and their track record is abysmal. How can an employee of an institution selling a product possibly act in the best interests of the consumer?”

Mr White also raised questions around the ability for institutional employees to act in the best interests of clients.

“Will these ‘qualified advisers’ give real, actual independent advice or limit their advice to their ‘off the shelf’ products? The product they are pitching to the client may well not be in their best interest compared to other products in the financial services arena. So, how can they meet any sort of best interests test?” he said.

Announcing the reforms in Canberra on Thursday, Financial Services Minister Stephen Jones did not provide any clarity on the level of qualifications that this new class of advisers will have to meet.

“On qualifications, as the name suggests, they will be required to meet a government-mandated education standard,” Mr Jones said.

“The exact level of education will be determined in time, but a minimum standard of a diploma may be the right balance to be less onerous than the requirements for professional advisers.”

Mr White also noted that the lack of detail makes it difficult to understand what the quality of their advice would be.

“We also must ask what education qualifications these individuals will be obliged to have. It cannot be less than any financial adviser practitioner, otherwise, their advice will be poor and uninformed,” he said.

“The result of this lack of complete knowledge can create poor outcomes and risks peoples’ future including their retirement plans.”

He added that the issue of liability for poor advice is also a major issue, with Mr Jones detailing that it would fall solely on the licensee.

“If there is a breach, the licensee alone should not be responsible, but this responsibility and accountability should extend to the individual giving the advice. If not, we know from past experience that the large corporate just pays the fine, gets a slap on the wrist, and moves on,” Mr White said.

“I call on the minister to extend the reach of the obligation and recourse and consider these potential ramifications before putting anything in place. There are many questions that must be addressed and if this is not properly considered, the adverse impact could be dramatic.”