Choice, Consumer Action Law Centre, Financial Counselling Australia, Financial Rights Legal Centre, and Super Consumers Australia have penned a letter to the Treasurer and Minister for Financial Services to express their support for several of the proposals made by the final report of the Quality of Advice Review (QAR) while reiterating their opposition to the return of banks, superannuation funds, and insurers to advice.
In the letter, the groups wrote: “Since the review was released, consumer groups have had constructive conversations with a range of industry groups about their reactions to the recommendations”.
“It is clear from these discussions that there is a broad range of views across the industry, with some sharing our concerns about proposals that would significantly weaken consumer protection for advice provided by employees of banks, superannuation funds and insurers.”
Assessing that while “those proposals” are likely to remain divisive, the groups backed the implementation of some “practical reforms”.
Two of the measures that the groups are encouraging Jim Chalmers and Stephen Jones to consider include improving disclosure in financial advice and removing the safe harbour provision from the best interest duty.
On the disclosure, the groups argued that clients often receive lengthy statements of advice that are of little use to them.
“We would support reforms to facilitate the provision of shorter, more meaningful information by advisers to their clients. While this issue clearly requires more detailed work by Treasury, well-designed reforms would help consumers to better understand advice while reducing compliance costs for advisers,” they said.
They, however, expressed their opposition to the recommendation that advisers no longer be required to provide any record of advice to their clients.
“Records of what was advised and the reasons for it are critical to the ability of the Australian Financial Complaints Authority to determine complaints, especially where an advice firm has gone out of business and it may no longer be possible to access the firm’s internal records. That will in turn be crucial to the ability of consumers to receive compensation from the Compensation Scheme of Last Resort.”
On the safe harbour recommendation, the consumer groups said that “as long as there continues to be a clear, principles-based best interests duty in the Corporations Act”, they would “be willing to support the removal of the safe harbour provision”.
“While this provision was never intended to encourage a laborious, check-list based approach to compliance, there is considerable evidence that this has been the result, and industry groups have argued that this drives up the cost of advice,” they said, adding that removing the safe harbour provision could reduce costs to advisers.
However, Choice and its peers stressed their stern opposition to the return of banks, super funds, and insurers to advice.
They argued that if the review’s recommendations in this area were implemented, “this would create an environment in which the sort of conduct that led to the Banking Royal Commission could re-emerge”.
“We also note that the proposed ‘good advice’ test is vague and poorly defined,” they said, adding that the introduction of this test would likely involve a costly transition.
“We do however believe that there is a genuine opportunity to improve access to advice for the growing number of people with superannuation approaching retirement. Rather than the sweeping reforms across the superannuation, banking and insurance sectors recommended by the review, we recommend that the government focus the next stage of consultations on public and private measures that could improve access to advice for people in the retirement phase,” the groups said.
This, they noted, could be achieved through a targeted process led by Treasury, focusing on improvements to the quality and accessibility of relevant government programs; and scope and regulation of retirement phase intra-fund advice.
Moreover, the groups welcomed the government’s intent to consult widely on the recommendations.
I’m a consumer and these groups dont represent me.
What else does Jones need to do something? Quick to legislate an extra cost for our profession in the CSOLR but completely impotent, lazy and tardy when all and sundry demand some practical changes that would reduce the cost to advise.
Strange but great to have advisers and consumer groups on the same page!
Mr Jones, please put the letter in the bin and consult with industry practitioners, not consumer groups, ASIC, licensees, product providers, academics, or politicians.
Could not agree more. I am a financial planning academic who will admit that she is not fully conversant with what needs to happen next with the recommendations like the practicing advisers do.
What makes them “consumer groups”?
They are largely, if not solely, funded by the taxpayer via the government.