“There are 16,000 financial advisers in Australia, no matter what I recommend, no matter what reforms are made, there will never be enough advisers for everyone to get the advice they need,” Ms Levy said.
“Advice is episodic, so we need a diversity of providers and the obvious candidates are the people that look after our money or lend us money,” she noted.
Ms Levy said she wants to encourage banks and other institutions to use the information they have to advise their customers.
“We know superannuation funds are giving advice. I would be saying they have a responsibility to be giving helpful advice to their members and likewise banks, insurance and investment managers,” Ms Levy said.
“It is this idea of a whole range of different providers who are able to provide help and assistance, and personal advice along our life journey.”
She said she is still in the process of coming up with the right definition of ‘good advice’ — her current definition 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”.
Ms Levy has been at the mercy of critics who have argued that her proposed watering down of the best interests duty to an obligation to give ‘good advice’ would reverse the work done by the Hayne royal commission.
However, Ms Levy argued on Tuesday that she is not walking away from Hayne’s findings.
In her QAR proposals paper published at the end of August, the reviewer proposed that the “definition of ‘personal advice’ should be somewhat broader so it is clear that it applies whenever a recommendation or opinion is provided to a client about a financial product (or class of financial product) and, at the time the advice is provided, the provider has or holds information about the client’s objectives, needs or any aspect of their financial situation”.
Speaking at the summit, Ms Levy explained her thought process.
“The first step to think about in these proposals is that I am suggesting if an institution or a financial services provider has information about you or you are their customer, and they’re recommending a product or giving an opinion about it, then in my world they are giving personal advice. Now that is a big step up, that is a big consumer protection mechanism that doesn’t exist now,” Ms Levy said.
“I think we need to encourage banks and institutions, insurers and everybody to use the information they have to give advice to their customers. If you expand the range of circumstances in which you’re giving personal advice, you need a standard that adjusts to the circumstances and to the needs of the client and I don’t think the best interests duty does that. It doesn’t cope very well with being an employee at a product issuer, whether that’s a superannuation fund or a bank or an insurer.
“Then I thought about what we can have that is fit for purpose and so I am thinking about a duty to give good advice, because that is the word people keep using when they describe what they want and what they want to give,” Ms Levy said.
She added that: “Best interest duty has not gone, it will apply to somebody who is acting as an intermediary.”
“I think he [Kenneth Hayne] talked about a person who is acting as an intermediary, somebody who has assumed an obligation to act in your interest, well, they will have that obligation to act in your interest.
“So the financial adviser that is paid to provide personal advice will continue to have that duty,” Ms Levy explained.
“Bankers, home loan lenders and mortgage brokers, Ken Hayne recommended that mortgage brokers who are acting as an intermediary have a best interest duty. So that’s now part of the law. He didn’t make that recommendation for the loan officer in the bank.”
Asked whether if adopted, her ‘good advice’ proposal would mean that the vast majority of Australians are receiving advice that is not subject to the best interests duty, Ms Levy said: “They will be having to get good advice”.
“Good advice is fit for purpose”.
Ultimately, Ms Levy said it’s the super funds, banks and the like, that would be responsible for ensuring that ‘good advice’ is provided to their customers.
“And this is another important point to note here that the person giving the advice under my good advice model, where it’s not a relevant provider … the person that should be responsible is the licensee, it’s the institution, they’re responsible for taking whatever steps that are necessary to give that good advice to their customer.”
