A submission to the advice review lodged by 13 “truly independent financial advisers” has raised concerns with many of the recommendations made by the Quality of Advice Review (QAR).
“The outcomes of the QAR will have far-reaching consequences for both advisers and consumers, and to adopt many of the recommendations in the current proposal will not only set the industry back to pre-FOFA levels of conflicts of interest, but also place consumers at significantly more risk than necessary,” the group said.
It fears that the proposals in the QAR consultation paper are centred around the “misbelief” that the main role of financial advisers is to recommend a particular investment or insurance product.
Noting that while this may be the case for advisers working for product providers or superannuation funds, the group explained that “for many, it could not be further from the truth”.
“To highlight why we believe this, the word ‘product’ appears 140 times in the QAR consultation paper and yet the word ‘strategy’ only appears twice; neither of these refer to the strategic financial advice,” the group said.
“The regulations imposed on financial advisers in the past 15 years support this notion that lawmakers have the belief that recommending products is all advisers do and as such, they all have a conflict of interest.”
To evidence their theory, the advisers cited the Financial Services Guide, the Statement of Advice, and the Fee Disclosure Statement, arguing that these documents all exist to prove that advisers are in fact putting their clients’ best interests above their own gain.
“We cannot speak for the whole industry, but from our perspective as independent financial advisers, it is nearly always the strategic advice and emotional support we provide that is of most importance and has the biggest impact on their future financial wellbeing,” the group said.
It highlighted that the questions being asked through the consultation paper “are not the right ones”.
“For example, you ask if the proposed changes to the definition of ‘personal advice’ are likely to reduce regulatory uncertainty, facilitate the provision of more personal advice to consumers, and improve the ability of financial institutions to help their clients. The response to this is invariably yes, but with caveats,” the advisers said.
“The main caveat is that many product providers will be able to direct consumers to their own products regardless of the outcomes for the consumer.”
The one question that the group believes the QAR reviewer should be asking is, “Do the proposed changes to the definition of ‘personal advice’ make access to personal, unconflicted personal advice easier and cheaper for consumers?”
“In many cases, sadly the response to this question is no.”
Moreover, the group argued that the QAR proposals make it easier for conflicted product advisers and super funds to direct clients into their own products. Conversely, the advisers added, “there is very little thought to how best to support advisers that are trying to remove many of the conflicts of interest from their business”.
The advisers lodging this proposal include Phil Harvey – Construct Wealth; Andrew Saikal-Skea – Saikal-Skea Independent Financial Advice; John Hicks – John Hicks Independent Financial Advice; Craig Meathrel – Strategiq Wealth; Neil Salkow – Roskow Independent Advisory; Chris Young – CY Financial Advice; Jacie Taylor – Periapt Advisory; Peter Humble – Rise Wealth; Berivan Dubier – Curve Wealth; Tony Cafarella – AFM Wealth Strategy; Fergus Hardingham – FM Financial Solutions; Cameron Foster – Horizon Advisory; and Naomi Horobin – Clover Financial Group.
I agree with the thirteen “truly independent financial advisers.” As far as the recommendations go, unless it is a political ‘nudge’ to get this type of feedback, I see no point in continuing professionalising financial advice with advice standards, educational standards and a single disciplinary body given some of the suggested recommendations made in the QAR consultation report. If product providers can also supply advice, couched as ‘good advice’, then why not allow a level playing field and let currently registered ASIC financial advisers also just offer ‘good advice’ under the same set of principles-based approach super funds and banks.
What I find interesting is the use of the term ‘advice’ being used by product providers/distributors versus how financial advisers use the term.
From a pure common sense and observation point of view, product providers SELL or DISTRIBUTE products they create in-house. Financial advisers supply strategic advice that includes them having to consider and compare several financial products. Only, if financial products are necessary to implement a particular strategy while being subject to advice standards, set of code of ethics (ethical standards) and educational standards are products part of the advisers’ recommendations. I do not understand why banks and super funds cannot be classified as SELLERS/DISTRIBUTORS of products and qualified registered financial advisers classified as Financial ADVISERS. Car sales dealerships have no problem in being called salesperson/distributors of cars, real estate agents do not call themselves property advisers but real estate agents who SELL real estate. What is the problem with banks and super funds in also being called financial product salesperson/distributors/agents because they DO NOT give financial advice, but sell a product/s with features and benefits? It would be far clearer to a consumer that banks and super funds and AFSLs SELL products (Product Distribution) and financial advisers supply strategic advice subject to professional standards, codes and education (Advice Professional). That means the term ‘advice’ cannot be used to ‘mislead’ consumers, which ahs happened in the past.
Have had a look at the submission from the 13 and agree with it 1000%. There are better ways to provide ‘cheaper’ advice other than letting product providers give ‘personal advice’ where the sole purpose is to get more people to buy/invest in their product.
Also love the comment from Jim Stackpool’s submission -[i] more product advice providers will confuse their clients who believe they are receiving ‘good’ advice, when in fact, it was ‘as good as we can do’ advice….. [/i]
This process is how do we make it easier for Super funds to deliver advice….. They don’t want Australians to get advice from actual Advisers like these guys…. The Finance Minister and Assistant Treasury clearly stated they’ll leave the 5-10% of hi net wealthy Australians to advisers and they’ll be able to charge whatever, without any modification of existing legislation and the rest of Australians will get Advice from Super funds and their trusted Accountants. It’s ASIC preferred model as well. I didnt’ even bother to write to a submission because Advice as we know it will be dead in five years and I’ve been spot on for the last 20 years. Get your resumes out post 2023 and start applying to work in a call centre for Telstra Super.
Where did you get the figure of “5% – 10%” for high net worth Australians?
I suspect that figure is well under 5% and the way the economy is going it will be reducing even more over
the next few years.
I agree with the comments made by the “Group of 13”. I’ve been a self-licensed adviser for over 20 years. I work hard to make sure my clients sleep soundly at night. I’m not a product flogger. I provide answers for questions that clients ask. I make no product recommendations unless I firmly believe my clients will be better off by following my recommendations. I take their attitudes to risk seriously. I provide them with the tax implications of following recommendations. I work with Centrelink clients who need strategy and common sense to help them navigate an increasing complex area during their retirement years. I advise on strategies for funding aged care. I advise on documentation required for navigating end-of-life matters – estate planning, EPoA’s, living wills, Medical Treatment Decision-Makers. I accompany my clients to their lawyers while they work through very personal and difficult matters. I send invoices to my clients for my fees. I have no bad debts.
The QAR has very little to say about how I provide a service to my clients and how they pay for it.
And I’m not the only financial adviser struggling with the mountain of red tape.
A noble response from the group of 13, however, Australia has a population of nearly 26m people. We have a trickle of new entrants into the sector and nowhere near the capacity to meet the needs of our population. We need a sensible and pragmatic approach to the topic,, that appears to be the balance which Michelle Levy is attempting to bring into focus.
Tim, do you really think allowing product providers the ability to ask 5-10 questions and then provide them with a recommendation that they should invest in 1 of their 5 investment options is a good idea? Remember there are no real safeguards for the customer.
As Jim Stackpool said, this is not good advice, it is “[i]as good as we can do advice[/i]”
To not come up with a better way shows that the bureaucrats helping Michelle Levy really don’t know what proper financial advice is. They think it is just putting people into investment products.
How much did they spend on the Hayne Royal Commission to demonise vertical integration? Even the tobacco industry receives fairer treatment from Parliament.
Yes, the AIOFP and its members agree with this Groups position. Levy was appointed by the Liberal Party [who are in ‘bed’ with the Institutions] to manipulate the landscape to allow digital and vertical integration options to flourish in a weakened regulated market. We hope Minister Jones will ‘cherry pick’ some of the ideas and dump the rest, also let’s hope Levy discloses what us tax – payers are contributing to her biased thought bubbles.