The Association of Independently Owned Financial Professionals’ (AIOFP) executive director, Peter Johnston, said that “all issues seem to be contingent on eliminating the best interests duty and replacing it with the best advice concept”.
In the QAR consultation paper, the review lead Michelle Levy defined “good advice” as that which “would be reasonably likely to benefit the client, having regard to the information that is available to the provider at the time the advice is provided”.
The AIOFP said that this change would not be in the best interests of consumers.
“We think institutions should receive a strictly worded legislated carve out where internal staff can discuss internal products with consumers and the government should not capitulate to pressure from the institutional lobby and their aligned associations,” Mr Johnston said.
“We are the first to agree that institutions should be allowed to have trained internal staff explaining/advising on their own internal products with consumers, it makes sense. But in order for this to happen, the Corporations Law needs to be changed to accommodate best advice and eliminate best interests.”
He added that the change to best advice would open the door to institutions providing conflicted advice and “re-commence masquerading as independent advisers to dupe consumers, a return to the bad old days one could say”.
The AIOFP’s expert adviser on legal, compliance and advice issues, Lionel Rodrigues, added: “There is a view that some ‘carve outs’ may be necessary for the ‘institutions’, however, that or they are defined. As the Corporations Act now stands, that would be difficult to achieve.
“This situation is made even more difficult by a recent and significant judgment which was decided by the High Court in 2021 on appeal from the Full Federal Court. However, the decisions by the two courts also provide statutory clarity, and may provide a solution.”
Citing the outcome of the Westpac High Court case that saw the bank fined $10.5 million, Mr Rodrigues said “the institutions should not be allowed to masquerade or disguise what consumers deem to be ‘advice’. The courts have been very clear that only factual information can be given”.
In an open letter to Ms Levy in November 2022, the AIOFP said 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,” Mr Johnston said.
so let me see if I have the right
the advice that is given is poor, your processes are poor – you need to be more compliant – you need to disclose more.
now we have busted your business model – and demanded a new model – and as a consequence, we want you to produce more paperwork – cost to support all clients have increased 30%
quick let’s professionalize this rabble
let’s have them pass an all-seeing all-encompassing exam – irrespective of how they give advice – or two whom the give advice – dont worry or resolve the conflicts within the code of conduct – just wing it.
note to self – this is going to raise the price a lot more
let’s introduce a levy fee/ tax – on all advisers so we can supervise them,
now – all those measures we have introduced – are taking more time – and the cost is passed through to the client
hang on a minute lot of good people with modest account values now won’t get advice.
Ok I have a solution – two tier solution –
tier 1 – let the advisers know we see the problem – and we have the QAR to address it
Tier 2 – have the review and focus on everything but the problem – we can give the untrained, unqualified, self-serving mates a free pass.
The advisers wont cotton on – we will run a smoke screen – they are still trying to make up numbers after 25% of the advisers have left the industry – hang on another minute – we have the biggest cohort of retiree’s approaching retirement = perfect timing.
Changes to legislation should be based on case law.
The court has viewed Westpac’s “good advice” to be inappropriate.
The call centre at the banks should be allowed to give account balance and nothing else.
Seriously, has the pendulum yet reached peek stupidity? Correct me if I am wrong, but this seems to be the way to protect retail clients who can not afford financial advice – it is called better advice
“would be reasonably likely to benefit the client, having regard to the information that is available to the provider at the time the advice is provided”
So basically, for the provider to limit their liability, minimal information about the client is best? Make a contribution to super you say – don’t ask about the mortgage or the credit card debt?
Congratulations to all involved I guess – what could possibly go wrong in this brave new world?
I feel sorry for the poor retail client – what chance have they got of getting advice in their best interests?
This is going to be the biggest thing that will impact our industry over the next decade.
Advice should be delivered by registered licensed Advisers . Conclusive Academic evidence supports that.
Providing “exemptions” to enable some Super fund to flog more products or even use Advice to flog more products is not the solution.
I’ve been in the industry for 25 years and I’m confident that if this legislation progresses it will wipe many Advice firms out. I guess that’s what they’re hoping for. FASEA will be a walk in the park compared to the damage this is going to do.
The same could be said for larger AFSLs that venture into the space of creating their own products and selling them to clients. If it is conflicted advice, then that is what it is, whether you are a bank selling your own products or an AFSL dabbling (as quite a number have, with a litany of tragic results for clients) in ‘combining products’ which they then have their Advisers push, with the AFSL rather than the Adviser getting the commissions.
in theory yes but you are about 10 years behind. all that has gone years ago.
You mean those groups that have a MDA Managed accounts whereby their advisers are pushing clients into their one size fits all products?
Exactly, think we have already been put back decade. Government can not run a chook raffle let alone our industry
Again good on you Peter @ AIOFP, keep rattling the cage.Ms Levy is a levy on our profession. Firstly she’s a lawyer and ought to know the Corporations Act inside and out. Then she’s pro-finfluencers only to be slapped in the face when ASIC successfully prosecuted a finfluencer. As a profession we have already adopted the ‘best interests duty’ and its contradictory and a backward step to suggest it be diluted to ‘best advice’ duty..Its a free kick to the insto’s..
if you want to keep best interests you are obviously not compliant lol. it is completely unworkable. has nothing to do with professionalism
Peter, well done on calling this out for what it truely is. Out of all the responses and commentary I have seen regarding the QAR, this right here is the critical issue facing our industry right now and if we don’t get this right, it will put us back another decade!!