In an article published on LinkedIn, Phil Anderson, the chief executive of the Association of Financial Advisers (AFA), criticised those who oppose the Quality of Advice Review (QAR), stating that “unfortunately, too many people look for conspiracies and problems, rather than opportunities”.
“With the risk of the QAR recommendations being bogged down with unnecessary and inaccurate negativity, we should focus our advocacy attention on achieving a package of obvious quick win solutions, that will deliver material improvements for financial advice clients,” said Mr Anderson.
“We need to find a range of recommendations that we can all get behind and then later progress the recommendations that are more complex, where the concerns about client detriment are strongest.”
According to him, the QAR recommendations aim to enhance the efficiency of the financial advice process and administration obligations by eliminating the need for fee disclosure statements, reducing the complexity of advice documents, redefining the best interests duty, and eliminating the safe harbour steps.
Furthermore, Mr Anderson noted that there is a risk of resistance to some of these reforms, especially in light of claims made by political and consumer groups accusing the QAR of “trashing” some of the vital Future of Financial Advice (FoFA) reforms.
However, he noted that none of the QAR recommendations would result in the removal of any of the key FoFA recommendations.
“The QAR reforms do not do anything to remove or ‘trash’ the FoFA reforms. They simply take into account the reforms that have come since FoFA and seek to leverage the learnings and make these regulatory obligations more efficient for clients,” he said.
“This will ultimately lead to a reduction in the cost of advice, which is beneficial for all Australians.”
Specifically looking at the QAR recommendations around reducing documentation, Mr Anderson pointed out that the requirement to prepare a statement of advice was not a FoFA reform, so there can be no FoFA argument against this.
“Whilst the Corporations Act places a heavy reliance on disclosure, research by ASIC in Report 632 questions this reliance and suggests that it should not be the default. Clearly, long and complex statements of advice are not good for consumers and a different solution needs to be found,” he said.
Turning to the safe harbour provision within the best interests duty (BID), Mr Anderson noted that removal of the safe harbour was also suggested by commissioner Kenneth Hayne as part of the financial services royal commission.
“With Hayne’s support behind the removal of the BID Safe Harbour, it was essential that it was carefully reviewed with a recommendation for its removal unless there was a clear reason not to,” he said.
“Michelle Levy definitely didn’t find any reason to keep it. The practical reality was that the safe harbour was only ever set up as an option for advisers to follow. It was and never should have been mandatory, however that is how it turned out in practice.”
Mr Anderson added that over time and through ASIC action, the focus switched to a lengthy checklist and significant additional obligations around compliance.
“One of the biggest issues with the Safe Harbour is Section 961B(2)(g), which requires advisers to ‘take any other step that, at the time the advice is provided, that would reasonably be regarded as being in the best interests of the client’,” he said.
“This is so open-ended, that it never fitted as part of a safe harbour. Advisers never felt safe with this step. Some of the reactive groups have fought hard over the years to retain this catch-all provision, however, hopefully with the support of commissioner Hayne, it might now disappear.”
Mr Anderson concluded: “With the merger of the AFA and the FPA locked in, we can now collectively get behind a package of QAR quick wins”.
“Now is the time to make this happen and get behind it.”
Anderson is missing the point. Opponents of QAR aren’t terribly concerned about tweaks to SoA and FDS requirements. They are concerned about allowing banks and super companies back in to give personal advice via unlicensed sales staff, with even less consumer protection than existed before FOFA!
FPA and AFA have foolishly aligned with the FSC in endorsing [u]all[/u] the QAR proposals, including the [b]very bad ones.[/b][i][/i] Consequently FPA & AFA have rightly drawn broad based opposition. FPA/AFA needs to quickly split from the product company line, and make it quite clear they only support those “quick win” QAR recommendations that reduce advice cost and complexity but do not reduce consumer protection. They need to make it clear they are opposed to the bad elements of QAR.
Unfortunately FPA & AFA seem too addicted to the fees directed to them by product companies, to properly represent the interests of advisers.
Support this legislation and you’ll get a free car and you’ll get a car and we’ll all get free cars….a year down the track nah mate the legislation got through but the free car didn’t……. FOOLED.