Speaking on ABC News on Monday, the lead of the Quality of Advice Review (QAR) Michelle Levy said she is disappointed the government has chosen to delay its response to eight of her 22 recommendations.
Last week, Financial Services Minister Stephen Jones revealed the government will accept 14 of the 22 recommendations made by the QAR lead.
The remaining eight recommendations, Mr Jones confirmed at the time, will be placed under further scrutiny, including recommendation one that proposes a broader definition of personal advice, the introduction of a good advice duty (recommendation four), and the removal of the obligation to give a general advice warning (recommendation two).
Also included in this batch are further discussions regarding the potential role other institutions — banks and insurers — could play in providing more information and advice.
During her appearance on ABC News, Ms Levy emphasised that these eight recommendations are the “core recommendations” aimed at ensuring Australians have access to advice throughout all stages of their lives.
“It’s somewhat disappointing because I think the eight are the most important. They are the ones that will really help make advice more accessible to more people,” she said.
Regarding the 14 recommendations accepted by Mr Jones, Ms Levy expressed that they primarily concentrate on the “traditional” framework for financial advice.
“It’s the comprehensive financial plan that you go see a financial adviser that you may have a relationship with. Some of the recommendations that I made will make it easier for them to give advice that is better suited to their clients and the minister, the government, has said they will implement those.
“They will take away, I suppose, a lot of the stuff that doesn’t really add value to consumers, a lot of the documentation that is required at the moment,” she said.
On Mr Jones’ decision to allow superannuation funds to expand their provision of advice, Ms Levy said: “It’s really hard to know what those changes will look like”.
“The minister had made an announcement, but we don’t have detail about what that will look like.”
Acknowledging the importance of receiving advice in retirement, Ms Levy questioned whether Mr Jones’ announcement pertaining to super funds would genuinely incentivise them to provide advice.
“I’m not entirely confident,” Ms Levy said.
Ms Levy also reiterated that she does not have a conflict with the minister but opined that his response seems to indicate a failure on her part to persuade him of the merits her recommendations hold for consumers.
“I’ve done my job and he is doing his. I am not aware of any conflict or tension,” she added.
In a separate interview on ABC Radio on Monday morning, Ms Levy explained the dangers associated with putting her recommendation concerning personal advice on hold.
“The general advice is where a lot of harm can happen and it’s all of those recommendations that address that which have not been accepted at this point in time by the government,” she said.
In the final QAR report, Ms Levy explained that general advice was too broad and leading to consumer harm. As such, she proposed the broader application of personal advice, which she defined as any advice given by a provider that has or holds information about the client’s objectives, needs or any aspect of the client’s financial situation.
Ms Levy also highlighted that the current regime has inadvertently led to scripted conversations that confine naturally personal advice conversations into general advice, to evade the more rigorous regulations associated with personal advice.
Ms Levy is ‘slightly nervous’ about super
Speaking on ABC Radio, Ms Levy further touched on Mr Jones’ decision to permit funds to expand their advisory role while ignoring banks and insurers, describing it as a form of “cherry picking”.
“I understand that superannuation is a specific need, retirement income products, going into retirement is really, really hard, so the natural provider of advice at that time is superannuation,” Ms Levy said.
“None of us have seen detail about how the government will actually implement what it’s saying, what it’s going to do with respect to superannuation. So, I’m slightly nervous about how far this actually, in fact, goes and how much it will do to encourage superannuation funds to give retirement advice.”
She explained that the minister’s promise regarding super funds doesn’t go to the heart of what stopped all providers, including funds, from giving good advice.
Touching on the possibility that the minister could dismiss her good advice duty at the Adviser Innovation Summit in Sydney earlier this month, Ms Levy said that failure to adopt the duty would put super funds in a “really, really difficult position”.
“I think they are already with that intra-fund advice because of that issue they’ve got between what can be conflicting duties.”
Namely, during her appearance on an ifa webcast in April, Ms Levy explained that her good advice duty proposes to fix a conflict between two obligations confronting super funds.
She assessed that a fund trustee’s obligations under the SIS Act [Superannuation Industry (Supervision) Act 1993], to exercise its powers in the best financial interests of members and to promote their financial interests as a whole, conflict with the duty to act in the best interests of an individual member receiving advice.
Referring to the current law as “a bad law”, Ms Levy said “it’s not fanciful” to think about a conflict in a situation where a trustee is asked to reconcile these two duties.
She explained at the time that what the good advice duty would do is change this approach by removing that inherent conflict.
While Mr Jones did not completely dismiss good advice, he did note that it would be further scrutinised, alongside the remaining sidelined recommendations, before the government’s final response is delivered by the end of the year.
Please Michelle….your report was purely for the Governments consideration. Your job finished when you handed it over!!
I am fine with the changes but it is not financial advice, it is product sales.
She’s done her job. She needs to stop meddling.
8 out of 22. That’s a fail. Perhaps next time ask Financial Planners.
And Paraplanners….
And folks that is world salad – for I tried to tiptoe the line between the provision of advice to more people ( noting of course the previous changes have all but destroyed easy (and less expensive access) ) and the obvious – which is a carve out to the ISN sector from meeting any one provision for the “Quality” of advice that is delivered by a trained, licensed, qualified adviser that has to meet the FASEA obligations and the impact of ASIC oversight.
Poor Ms Levy, employed by Frydenberg / LNP to find a way to get the dodgy Banks & Life companies bank into product flogging distribution / sales advice channels.
And for now it has not worked.
For Real Advisers we hope it never does work.
The dodgy Banks & Life companies have truly proven they should not be trusted in financial advice.
Yet they have let industry funds do exactly the same thing. If the light is ever shown into that area just as many things will be found. You can’t however find anything wrong if you don’t look.