“There is little detail available at this stage, but on the face of it we are deeply concerned at the direction of these announcements,” Sarah Abood, CEO of the FAAA said following Minister of Financial Services Stephen Jones’ announcement on Thursday.
“Our members fear this could be winding the clock back five years on our profession,” Ms Abood continued.
She said the government’s response, particularly regarding the creation of a new class of financial advice providers, “appears to invalidate the hard work and pain that has been involved in creating financial advice as a profession”.
Specifically, on Thursday, Mr Jones announced that any financial institution will be able to provide personal financial advice to consumers, using people who are not financial advisers – but are called “qualified advisers”.
“There is no detail on the qualifications that would be required, however they would be substantially less than what is currently required to provide financial advice. Thus, the proposed term is self-contradictory and extremely likely to confuse consumers,” Ms Abood said.
She highlighted “some positives” in the minister’s announcement, however, including more support for scaled or limited scope advice, which, she said, is needed and welcome. Ms Abood also applauded changes to the statement of advice, the removal of the safe harbour steps, and Mr Jones’ commitment to review the Code of Ethics after legislation is implemented.
“Some of these changes were suggested in the final report of the Quality of Advice review. We supported, in principle, the government’s initial response, which suggested a cautious approach, testing the more contentious changes such as the introduction of non-relevant providers to the advice space with super funds initially. There was a limited scope to the type of advice that could be provided and collectively charged because of the Sole Purpose Test. And these people could become, over time, the next generation of financial advisers and planners,” said Ms Abood.
“However, in this latest proposal, these ‘qualified advisers’ will provide something that passes for advice for free, confusing clients and obscuring the important differences between information from a partly-trained salesperson, and comprehensive financial advice from a fully qualified professional”.
‘Handing back’ advice to institutions
Ms Abood said that while “we created financial advice as a profession”, the government “tied it up in so much red tape that the cost of proper financial advice is through the roof”.
But rather than fixing the red tape to get consumer costs down, she said that the government now appears to be handing back to institutions the right to hire minimally qualified salespeople, who call themselves qualified advisers, to sell their products to consumers.
“We have separately responded more fully to the draft legislation on the stream 1 changes, but in summary we believe that legislation as drafted will have very little impact on reducing unnecessary processes, paperwork and compliance steps”.
“We will have plenty more to say on this in the days and weeks to come. In the meantime, we will be engaging members to ensure the final legislation delivers on the intent and goals of the review, to help consumers get the high-quality financial advice they need.”
