The Association of Independently Owned Financial Professionals (AIOFP) has addressed an open letter to Quality of Advice Review (QAR) lead Michelle Levy arguing against the return of banks to financial advice.
To underpin its argument that banks should remain at arm’s length, the AIOFP attached a list of 191 product failures to its letter.
“Attached is clear evidence of how the banks/institutions have managed their products since 2006 and specifically incorporating the GFC crisis,” said AIOFP executive director, Peter Johnston.
“Their management skills have been woeful; the funds have generally performed poorly with capital losses and expensive compared to other options like the Industry Superannuation funds sector. As you will see, there are 191 funds with $43 billion of consumers capital either failed, frozen or impaired,” he continued.
According to Mr Johnston, the banks should stay out of advice “of any description” and stick to what they do best — “standard banking, administration, management activities”.
“In fact, when you consider how poorly the banks have performed in the wealth space over the years with inflicting consumer capital losses, no advice will be better than getting advice from them for most consumers,” the executive director said.
“We hastened to add that the advice community has been inexplicably blamed for these failures [product failures] whilst the institutions and regulators run for legal cover. As you no doubt know, advisers just recommend them, ASIC register them, banks/custodians/trustees manage them and research houses rate them,” Mr Johnston opined.
“Considering the world is likely to be entering into another GFC similar event in 2023, we would suggest consumers are better to leave their cash in a savings account rather than running to the banks looking for solutions.”
His solution to the compliance burden imposed on advisers is a truce between ASIC and representatives of the advice industry in the form of an afternoon meeting.
“The perennially discussed ridiculous levels of unnecessary compliance loaded onto advisers and consumers over the past seven years could be resolved in an afternoon between ASIC and representatives of the advice industry,” Mr Johnston said.
“This should reduce the cost of advice by at least 50 per cent and even further if other options are implemented”.
Last week, the lead of the Quality of Advice Review argued that “advice is episodic” and “so we need a diversity of providers and the obvious candidates are the people that look after our money or lend us money.”
Ms Levy said she wants “to encourage banks and other institutions to use the information they have to advise their customers”.
Her words, spoken at The AFR Super and Wealth Summit, sparked an impassioned reply from ifa’s readership, with many questioning the merits of the QAR and the outcomes it could yield.
Peter is speaking the truth, much the same as the little boy in the “King’s new clothes”. A second tier of irrelevant providers is naive at best and dumb at worst.
Damn you Peter, why did you go and ruin everything!!
I have always disagreed with your stance on education requirements, but here you go talking sense. It is good to see at least 1 representative body getting behind advisers.
Not sure this rant is helpful. Yes ASIC could solve our problems by working with us for an afternoon, but they have never done that and instead they have actively campaigned, influenced and distorted the landscape for decades to make our life as difficult as possible. Some of Levy’s ideas are bad, but there are also some very good things in her draft which will counter ASIC’s meddling.
As for a GFC event next year, WTAF?
The AIOFP really are much better at articulating issues than the other Professional Bodies, who’re more and more impotent (CSLR, lif, non responsible providers in QoAR).
Lawyers need to stay out of this industry. You are not helping client’s and the government has no clue.
How could anyone in their right mind, suggest that banks return to providing financial advice after their enormous blot on and failure in that industry. They should never, never be allowed to have ant involvement in financial advice.
Peter Johnstone is pretty good. It is wise to remind ASIC what happened during the GFC and that we are heading in the same direction now
The sooner we get banks and AMP out of the advice space the better. Any product issuer cannot possibly comply with the non-conflict requirements of FASEA.
Doesn’t Industry Super already has most of the FUM – helped by the RC?
It’s not often I agree with the AIOFP, but on this occasion I must. Consider the level of retribution they were ordered to pay along with the pain & suffering to their shareholders, ‘valued’ clients and advisers.
Rest my case