According to Mr McDermott, a big battle is shaping up between two contenders — Big Insto and the Friendly Adviser Co.
The former, he said, is a heavyweight behemoth that’s been battered and bruised from numerous scandals and run-ins with regulators, courts, and the financial services royal commission. However, despite its troubled past, Big Insto appears smug and confident, and with the implementation of Recommendation 3 from the Quality of Advice Review (QAR), it could become a full-time contender in the financial advice space again.
We bring you Mr McDermott’s post in its entirety:
Compare the pair? Recommendation 3 of QAR a fair fight?
In the battle for the hearts and minds of financial advice consumers we have two contenders.
In the red corner, we have a heavyweight behemoth. Battle weary and bloodied from numerous scandals and run ins with the corporate regulator, courts, and the financial services royal commission. And significantly lighter of pocket, having just offered or paid out $4.7 billion for fee for no service and non-compliant advice (on top of $$B’s more over the years for other transgressions). Yet somehow smug and confident, with a large dose of hubris. He goes by the name of Big Insto, and the hot tip is that if the recommendations from the Quality of Advice Review get implemented as is, he’ll be a fulltime contender in the financial advice space again.
And in the blue corner, we have the comparative lightweight, Friendly Adviser Co. Also battered and bruised from previous run-ins with Big Insto, she is occasionally nimble and at war with herself but nonetheless gallantly fighting the good fight, valiantly trying to attain professional ranks. She’s been trying to wean herself off Big Insto for years.
And in the middle of it all we have … the consumer, ready and willing to receive financial advice to help set themselves up for the future. But what choice to make.
Under Recommendation 3 of the QAR, advisers can be either relevant providers or not relevant providers.
Both can provide personal advice that is tailored to a client’s needs, situation and objectives.
Both have to provide “good advice”.
But Big Insto doesn’t have to meet a statutory best interests test. Its advisers also don’t need to meet the numerous other professional standards, such as education and training obligations and complying with a Code of Ethics. Because Big Insto has chosen to be a non-relevant provider. Another benefit — clients can’t pay for the advice (and issuers can’t pay commissions), but being Big Insto, they can vertically integrate and have conflicts to their heart’s content and cross-subsidise the provision of financial advice. Meanwhile, Friendly Adviser Co gets lumbered with all the costs and compliance burdens of having to meet the higher standards. But, for all intents and purposes, the offerings look ostensibly the same.
So, poor confused old consumer thinks: well, they both provide “good advice” that is tailored especially for me, but Big Insto won’t charge me anything and they are big and “trustworthy”. Whereas Friendly Adviser Co will charge me thousands. Now, consumer really likes the adviser at Friendly Adviser Co and loves the servicing program and assistance they will provide. But Big Insto can provide something that looks very similar, without it costing dear old consumer a cent.
A fair fight? Unfortunately, it looks like the deck is stacked in Big Insto’s favour in this battle if Recommendation 3 is implemented as per the QAR report.
If you would like to share your view on QAR’s third recommendation, write to us on editor@ifa.com.au
Levy claims that Recommendation 3 came about because many consumers need assistance to make well informed financial decisions, but can’t easily get that assistance from qualified financial advisers if they have simple one off needs or limited capacity to pay.
That may well be true, but it doesn’t mean allowing product companies to give conflicted, sub standard, advice is the only solution to this problem. There is plenty of scope for product companies to provide targeted factual information to consumers according to their life situation or specific requirements, without going down the (conflicted) advice path. Why hasn’t this option been explored further?
Well, based on the above, it is plainly clear who will be the beneficiary of the QAR. And does anyone care, other than the advisers and the practices that represent their livelihoods? The Australian Govt. and Treasury have done everything in their power over the last 20 years to destroy independent advisers, the QAR is just another example.
[b]No doubt another Real Adviser stitch up on the way. [/b]
With LNP’s support of Big Banks and Life Companies &
Labor’s support of Industry Super.
It is very clear Canberra’s Pollies and Regulators support the Big Insto’s in a big way.
[b]And most consumer will yet again get scammed by the Big Insto’s. [/b]