Earlier this 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 Quality of Advice Review (QAR) and the outcomes it could yield.
As such, ifa approached the Financial Planning Association (FPA), the Association of Financial Advisers (AFA) and the Association of Independently Owned Financial Professionals (AIOFP) to gauge their views and opinions on Ms Levy’s most recent statements.
We bring you their responses in their entirety.
FPA CEO, Sarah Abood
“There’s no doubt at all that professional financial planners are best placed to advise Australians on their financial affairs. One considerable side-effect of the recent reduction in planner numbers is a current significant gap in the accessibility of advice, with under 16,000 financial advisers supporting a country with a population of 26 million.
“To fill the gap, we first need to significantly reduce the unnecessary compliance burden and red tape that inhibits the efficient and effective provision of financial advice. This will help in three ways: it will lower the cost of advice, it will make it possible for planners to serve more clients, and it will also make the profession itself more attractive (helping both to retain existing planners and recruit new ones). Many of the recommendations in the Quality of Advice proposals paper will be helpful in achieving this.
“We understand and appreciate the challenge the review is trying to solve for consumers, particularly for those with basic needs. We see the proposals to allow product issuers to provide simple personal advice (which in many cases was previously defined as ‘general advice’) as one potential part of a solution — but with some important caveats.
“Those caveats are, firstly that the advice should be simple and where the risk of consumer detriment is limited. As an example, it should not include matters such as transition to retirement advice, which can be highly complex, and where getting it wrong can have significant and lasting negative impacts on consumers. Secondly, those providing this simple advice must have appropriate and sufficient education.
“We have suggested that these people should have studied nested elements of a full financial planning qualification. This will help in two ways: it will ensure these individuals have appropriate and relevant knowledge to advise clients on simple matters, and over time it will substantially increase the numbers of fully qualified financial planners who have experience dealing with clients.
“Much successful work has been done to improve the quality of advice Australians access and we must ensure that the proposals don’t risk reversing this.”
AFA CEO, Phil Anderson
“The AFA remain strong supporters of the Quality of Advice Review and the work that they are doing to make financial advice more accessible and affordable. We continue to believe that these proposals will make a material difference to both the cost and ease of obtaining and providing financial advice.
“We appreciate that the proposal to allow people who are [non-relevant] providers to provide personal advice is highly contentious. However, we believe that if this is subject to sensible controls, it will ultimately be beneficial for Australians as a whole, as they will have better access to simple advice. So, the key design issue here is what these sensible controls are, and we think that it needs to be limited to simple advice and that a new and much higher education standard should apply.
“We accept that 16,000 financial advisers cannot meet the financial advice needs of all Australians. We actually believe that there will be little competition between those providing tailored financial advice and those employees of financial product providers who are providing simple advice. If we can accept this, then we can move on and focus on what will make a real difference to the world of professional financial advisers.
“The protestations about these recommendations undoing the hard work of the Hayne Royal Commission are in our view, misguided.
“What recommendations did Hayne make to directly improve the quality of advice? Annual renewal, banning grandfathered commissions, changing breach reporting and the other recommendations, had little, if any, impact on the process of providing financial advice.
“We should not allow Hayne to be the excuse for not fixing the mess that financial advice has become. Quality does not come from following drawn-out processes and complying with red tape. It comes from having the necessary knowledge and skills, a commitment to the client’s best interests, and demonstrating professional judgement.”
AIOFP director, Peter Johnston
“It was initially suspected that Michelle Levy was an appointment by the Liberal Party to allow the institutions back into the advice industry with digital advice by lowering the standards for consumer protection, this now emphatically confirms it.
“Thankfully, Minister Jones will ‘cherry pick’ some of her ideas and bin the rest. What a waste of taxpayers’ money and worse, seven months of wasted industry development time waiting for this confused conflicted diatribe.”
Who agrees with the QAR proposal to remove FDSs? You would be crazy to say no to that. There is a lot that is good in this QAR proposal package, although some of it is not about financial advisers and is focussed on giving better access to advice. It is a package. We can’t expect to like it all, but that should not mean that we carry on like a pork chop about it. It would be a huge win to get rid of FDSs, so why does Peter Johnston think that it is in the best interests of the advice profession to behave like this. With a month to go until the final report, why would you want to be so abusive to the person who is our only hope to fix the current mess that is the financial advice regulatory regime. When is he going to be called out for this destructive behaviour? It is time the people close to him told him to stop drinking his own red cordial.
Why are Professional Financial Planners required to issue FDS’s when it is proposed unqualified Product Provider staff can provide advice – and no FDS required?
I fail to see how it will get cheaper now, its like asking the service stations to lower their prices to 2 years ago.
Now QAR is suggesting going back to twenty years ago when we can provide many pieces of simple advice to avoid the requirement for complex advice. If this is what QAR wants, please allow all professional advisers to work the same as the product providers to provide simple advice with limited liabilities.
The question is: [b]Can you trust the big guys again, given their tarnished record?[/b]
I wonder if Phil and Sarah are aware they should be representing advisers, not consumers, not fund managers, not super funds…
And they can’t understand why their membership is shrinking…
I think Peter Johnston (AIOFP) hit the hammer on the nail (‘cherry pick’ QAR ). We need to encourage closer co-operation (within our fragmented profession) and encourage Minister Jones not to be swayed by the ‘big institutions’ and ‘cherry pick’ the best elements of QAR. We should not dilute the rigour of consumer protection, so its a deleicate balance. Senator Hume should hang her head in shame with her comments of recent.
What about the FASEA exam? Should it be scrapped and replaced with Master of Financial Planner? It would be more approprate.
From the banks / superfunds perspective there is some recent “scar tissue” that would need to be resolved for the proposed non relevant providers to be given a start.
The most productive use of Ms Levy’s time is to address the regulatory overreach to allow the 16000 advisers remaining to become more productive.
So basically all the pain over the last 5 years is to be wound back so that all of the big licensees are allowed back into the industry to continue with business as usual. Are we going to make financial planning a profession or just go back to product sales?
No, as a Financial Planner you can be a profession and have all the red tap and qualifications you like – call yourself a professional and charge big fees.
In the mean time, you will be going nowhere near the majority of Australian Super FUM – their needs will be served by the product provider directly without the need of a “Professional” – all paid for out of the product admin (but it is technically not a Commission I believe – just pay bonuses to staff if necessary I guess). If said member needs professional advice – in house it is – and likely much cheaper than the privately run practice who does not have access to fees from the Admin of the product.
But I could be wrong on all of it.
IMO FPA and AFA have sold Professional Financial Planner out.
This right here is on the money. But while they sold professional planners out you can’t dismiss blame from the planners themselves.
All this happened because a majority of planners were too busy telling others to get out of the industry or bragging about how fast they did fasea and so on. There was no ” brotherhood ” in the industry and that allowed it to be ripe for the picking. If people had put egos behind them and stood as a group the industry would be in a better position, but instead they got played and allowed this to happen falling for the fantasy that this would make everything ok.
What IOOF did with bridges should have sent shock waves, but it didn’t.
Sounds like the penny might be starting to drop for you that it was never about becoming a profession – it was about getting Financial Planners out of the Mum and Dad market – but I could be wrong. You weren’t fooled by the lets become a profession and the regulators will like us line were you?
I’m bit on the fence with this one. Being an IFA with own licence I’d like to believe all the pain we endured the last 12 years has moved us closer to being a profession, however it is also undeniable that the majority of innovation, software, platforms and even training events during this time were either directly or indirectly due to having larger insto’s in our field.
Likewise, with union super becoming ever more powerful in every respect, we do need some scale & firepower on the ‘non-socialist agenda’ side of the equation.
Doesn’t mean you have to get in bed with them and we know that if they again stuff up & don’t learn from prior mistakes, that they’re good for millions in remediation. A number of clients I inherited got paid tens of thousands due to prior bank advice, for what I honestly believe wasn’t bad advice but rather the bank just found it easier/cheaper to make blanket payments.