CEO of Zenith Investment Partners, David Wright, has warned of possible unintended consequences of financial services reform.
Proposals to scrap ‘general advice’ and introduce the concept of ‘good advice’ were included in Michelle Levy’s Quality of Advice Review (QAR) proposal paper released in August.
Among the 12 proposals made by reviewer Ms Levy, number three argues that ‘good advice’ is advice that 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.
However, in a statement on Thursday, Mr Wright argued that the replacement of best interest obligations with obligations to provide ‘good advice’ could lower the quality of advice provided to consumers, and the standards of advice across the industry as a whole.
“As an investment research business, we are supportive of the QOA review and its objectives. We remain a strong advocate of the value of quality advice and believe it should be more broadly available to consumers. However, the recommendation to deregulate general advice may have an adverse effect,” Mr Wright said.
He added that selected services — those that may not be recognised by consumers — are nevertheless important to the integrity of the quality advice standards delivered to the market under the current general advice standards.
In particular, Mr Wright opined that quality product research and screening for advisers and their clients is a critical market function.
“This will continue to be the case as the supply of product options and manufacturers for investors inevitably expands. This view is consistent with ASIC’s Regulatory Guide 79 (RG79) and the requirements it places on research report providers,” Mr Wright noted.
“A regulated approach to investment product and superannuation fund research and delivery, together with the consumer protection measures noted in the QOA review recommendations, will afford consumers (and their advisers) stronger protections and further support the delivery of quality advice.”
Similar concerns were raised last month by the Stockbrokers and Investment Advisers Association (SIAA).
At the time, SIAA CEO Judith Fox said the QAR must ensure consumers are not disadvantaged.
A number of industry associations have responded positively to the proposal paper in recent weeks including the Joint Associations Working Group, the SMSF Association, and the Financial Services Council.
Ms Levy recently discussed progress on the QAR on the ifa Show. Listen to the full episode here.
Yes, the Industry super funds would love good advice definition. it allows them to offer half baked advice on not just members interests in their funds but other assets outside, and includes age care advice. Mind you, it seems no degree required. Meanwhile, real advisers will still be required to observe best interest as a professional standard. Two sets of rules as it was ever thus. One can only wonder why I bothered doing masters degrees, FASEA exams and ethical bridging courses. DISGRACE!!!