“I remain a bit puzzled,” the lead of the Quality of Advice Review (QAR), Michelle Levy, told the SMSF Association National Conference.
“In the main, I think these proposals are overwhelmingly good for the entire industry, but much more importantly, they are overwhelmingly good for consumers. And I would have thought that they could be embraced,” Ms Levy said.
Ms Levy submitted her final report to the government on 16 December. However, the government kept the report under wraps for seven weeks before finally making it public last month.
Although the Minister for Financial Services, Stephen Jones, has yet to release any commentary, he has indicated that he plans to stress test the recommendations and obtain additional expert analysis.
While additional analysis could help validate Ms Levy’s recommendations, it may also delay any potential action.
Considering these circumstances, Ms Levy told the attendees that she is currently both “bemused” and “disappointed” by Mr Jones’ response or lack thereof.
“I spoke to so many people, I sort of tested the ideas, I spoke [to] Kenneth Hayne about the ideas, I spoke with as many people as possible. So, I suppose [I am] somewhat bemused at best, disappointed,” she said.
Although her goal was not necessarily to “make people happy”, Ms Levy emphasised her strong conviction that her final report was “overwhelmingly good” for advisers.
“It may not be everything on your wish list. I was a bit pleased, I thought this quite works, there’s something in here for everybody,” she noted.
Support for stress test gaining
But support for stress testing Ms Levy’s final report appears to be gaining in the industry.
Namely, speaking to ifa earlier this month, the chief executive officer of the Financial Planning Association (FPA), Sarah Abood, said that while Ms Levy clearly holds a “very detailed understanding of the law”, the FPA believes stress testing could help determine how recommendations are applied.
“What I would like to see done and I think has some potential is let’s pick up a whole range of issues, perhaps issues of misconduct that have happened, perhaps areas where participants are uncertain about how the laws would apply, and run those case studies through it and kind of stress test it to say, well, this particular piece of poor behaviour, would it still be against the law?
“And the other stress test I think we could do is ensuring that it’s practically able to be applied. So, if I’m running an advice firm and the law changed in this way, how would I actually deal with that? What systems and processes would I implement? Would that be reasonable?”
Similarly, the chief executive of the Association of Financial Advisers (AFA), Phil Anderson, told ifa that there are areas of the QAR requiring deeper analysis.
“There are many elements of the QAR recommendations that do not need any stress testing. The removal of Fee Disclosure Statements is obvious, as are the changes to DDO and FSGs. Equally the proposal to remove the mandatory requirement to provide advice documentation is a clear winner, however there will need to be some time spent by the profession in working through how this will be applied in practice,” said Mr Anderson.
He opined that the debate about non-relevant providers would be resolved by better understanding and further analysis.
“This particular recommendation has caused a lot of concern in terms of consumer outcomes from both consumer groups and some advisers. We think these concerns are overstated, however we do believe that it is appropriate to consider what controls should apply, including limitations on the types of advice that can be provided by non-relevant providers and the application of higher education standards,” Mr Anderson said.
While acknowledging the need for the “government to move quickly”, Mr Anderson said the AFA understands “why they would want to move carefully on those matters that have generated increased levels of concern”.
“We hope that they agree to move forward very quickly with those recommendations that are not controversial and where the consumer benefits are significant”.
Please do not be surprised Michelle, this has been political football (red tape bureaucracy) for a many, many years … and might I add is always a lower priority … in short they don’t care enough for the individual’s situation to which this industry and the advice it issues, relates to …
Surprised? He will have to consult with the Industry funds first. Simple.
“bemused” and “disappointed” witth Michelle Levy as she simply appeased industry funds and direct channels rather than fixing the industry
Its less of a “[b]Quality [/b]of Advice Review” and more of a “[b]Quantity [/b]of Advice review”
In response Jones says, and does, nothing
All that was needed was to reduce red tape and make it easier for those that have fewer conflicts of interest. Instead, Michelle has made it significantly easier for those with a bigger conflict of interest and slightly easier for those with lower conflicts of interest.
Such a missed opportunity.
To ensure this review was done objectively, Michelle Levy should fully disclose how much she is paid by each of her clients in the sector. It also reflects badly on Jane Hume to appoint someone with such conflicts, to conduct such a review.
Seriously, Levy seems completely naive to the fact that $3 Trillion and building in FUM are at stake here – now mostly controlled by Union Super – but I could be wrong – it could all be able the Australian people being able to control their retirement savings?
Based on ASFA’s recent figures on approximate market share, the $3 trillion in super is split up as follows:
– Industry Super 33%
– SMSFs 26%
– Public Sector 20%
– Retail 19%
– Corporate/Other 2%
I wouldn’t be surprised if the government and Industry Super target SMSFs in the next round of ‘reforms’.
What? Do you mean they’d try and attack FRANKING CREDITS and restrict retirement savings balances to a maximum amount…
[quote=Duke Nukem]I’m more confused as to why we needed QAR in the first place. The damage is done and those that left aren’t coming back.[/quote]
There’s always more damage to be done.
CBA, Westpac, ANZ and many many more all left the advice industry because the cost to maintain an AFSL and meet the demands of ASIC, AFCA, APRA, Choice and ensure advisers are meeting all of the demands placed upon them to deliver advice make it prohibitive to operate and provide a service to the consumer they can afford. Levy who has never been an adviser, and arguably has never engaged an adviser would have been paid an awful lot of money at the industries expense to tell us all what we need. Please…. what we need is less red tape, fairness and a better understanding from those that try and regulate and control an industry that needs to be commercial to survive. If what I expect happens is a continuation of this the only advice any consumer will receive is from the conflicted industry funds and direct to consumer product sales
Still waiting for the QAR’s monetary payment and conflicts of interest disclosure….
If Levy had experience as a Financial Adviser she would know that one of the first things you need to do before providing recommendations is a “risk profile”. Clearly this wasn’t done as her recommendations are radical and appears to be well beyond the risk tolerance of many stakeholders. If it’s overwhelmingly good for consumers then why are consumer groups so against the QAR recommendations?
If I presented a plan to a client without regard to risk tolerance and the client had major issues with the recommendations then they would probably complain and ask for a refund. I wonder if we can ask for a refund of this QAR report ? All we needed was easy wins to make things easier within the risk tolerance of most stakeholders.
“I spoke to so many people, I sort of tested the ideas, I spoke [to] Kenneth Hayne about the ideas, I spoke with as many people as possible. So, I suppose [I am] somewhat bemused at best, disappointed,” she said.
How many qualified Financial Planners?
Sounds to me like you simply implemented Commissions but only for directly employed staff – that way Product Providers can provide conflicted advice to retain and increase FUM – no need for BID and all that paperwork for product providers and good advice – and that’s a good idea?
She did speak to financial planners. I was one of them, part of a small focus group, in-between the first draft and final release. She didn’t listen unfortunately. It quickly became clear we were there so she could gauge what criticisms might be made of her recommendations, so she would be prepared to defend her report, and so she could tick a box to say she consulted with financial planners.
Exactly. “Speaking to” and listening and taking feedback on board are two different things.
Advisers have been stress tested over many years with change after change after change and here are the results :
1. some have taken their own lives sadly
2. some have left
3. some have retired
4. some have merged
5. some have reinvented themselves
6. some (many) have become bemused and disappointed
Remember when Jones told us that he was going to fix the “hot mess” and provide advisers and experience pathway “pretty quickly”? Well, if his ‘pretty quickly’ is 12 months and counting, I dread to imagine how long any QAR legislation will take.
Maybe he has realised the experienced pathway is not the best way forward and 8 years to conduct qualifications was sufficient?
As an adviser, how could you not be cynical and untrustworthy of Govt. and bureaucrats? They all say one thing and do another.
The reality is this. The QAR was set up under a previous Government and terms of reference were established by them. Politically, it is always going to be a challenge to endorse what will be “ScomMo’s” mob’s project. Spuddy Dutton would claim all the glory. That aint gunna happen. Remember the underlying influence of ISA. Many pollies may well be eyeing a career post politics and a board appointment to a super fund’s board isn’t a bad gig. Equally, there’s plenty of past evidence to show that ISA will support and endorse ALP policy that boosts or retains ISA FUM. And the biggy; the ALP will not want to upset that camp. At best, I reckon Personal Advice for super funds is on – and whatever makes THAT job easier will get through (reduced/no SOAs etc). Anything else ? No Chance.
“I spoke to so many people, I sort of tested the ideas, I spoke [to] Kenneth Hayne about the ideas, I spoke with as many people as possible. So, I suppose [I am] somewhat bemused at best, disappointed,” she said.
So Ms Levy “sort of tested the ideas”. Financial Advice in Australia has had 30 years of reform and so much change – to the detriment of both the consumer and advisers broadly. Given the track record of financial advice legislation, the expectation from Ms Levy that her QAR would be wholly embraced from day 1 rather than considered, questioned and tested just goes to show how far away she is from the coal face.
Labor is now in Govt and not opposition….no need to be “besties” any more with Advisers & promise the world as all parties will do in opposition prior to an election.
It will take time for Labor to consider & ensure their comrades and funding partners in the ISA will be the beneficiaries of any changes that are made to Financial Services regulation.
Bring back FOFA and Bill Shorten!
Get the legislation done, itll be another bastion of delays with the Senate so do something Jones!
That’s the problem Michelle. It’s not “overwhelmingly good for advisers” (juggling the Code, record keeping requirements and constantly defending advice to AFCA, ASIC and the courts) and I don’t see how they are “overwhelmingly good for consumers” (with opening up financial product mis-selling to ordinary consumers by completely unqualified people). However, it’s abundantly clear that the recommendations are overwhelmingly good for industry superfunds (with the ending of intrafund advice rules). Ms Levy has shown a penchant for alleviating regulation pertaining to financial product providers. Kenneth Hayne is all about what’s good for the legal fraternity and Stephen Jones is all about what’s saleable at a political level. None of the protagonists in this debate have adequately disclosed their conflicts of interest so it’s up to us as the uniformed proletariat mushrooms (kept in the dark and fed chicken sh*t) to determine if we are being sold down a line that is going to cause further harm to us as professional as qualified advisers and to our clients. Oh, and I don’t see that the poor humble client really get’s anything our of this that strengthens their wealth creation journey.
This is spot on – someone speaking through a clear lens. At the end of the day, legislators of Australian financial advice have a shocking track record (over the last 30 years) so why should anyone embrace change for changes’ sake? Until the protagonists disclose their payments and conflicts of interest, it is hard to consider any change until so. A bit like providing an SOA to a new prospect, without disclosing payment and conflicts of interest – “it will be good for you, just trust me!”
One way to ‘stress-test’ the recommendations is to think about them applying to other professions.
Should we allow pharmaceutical giants to sell their drugs direct to the public, with their sales reps permitted to give medical advice despite having no qualifications?
I’m sure there is a lawyer working for these big drug companies who thinks so…
I’m more confused as to why we needed QAR in the first place. The damage is done and those that left aren’t coming back.
IMO – after reducing Financial Planner numbers and banning distribution of Banks and AMP, looks like Treasury wanted to give Industry Super a clear run at hidden commissions and advice aimed at FUM retention – but I could be wrong. Never really did understand how Quality of Advice turned into Quantity of Advice – perhaps Michelle just did what she was told to do in all her closed door meetings – unless the transcripts are available somewhere?
Has anyone even spoken to the accounting profession? What about the Tax Practitioners Board? She missed the mark by a mile and Mr Jones knows this. There is a lot to play out after another wasted opportunity with financial services.