FPA, AFA, AIOFP respond to Levy’s proposal to allow super, banks to provide advice
The FPA, the AFA, and the AIOFP have responded to Michelle Levy’s recent defence of her proposal to allow non-relevant providers to provide financial advice and the subsequent concerns voiced by advisers.
Earlier this week, the lead of the Quality of Advice Review argued that “advice is episodic” and “so we need a diversity of providers and the obvious candidates are the people that look after our money or lend us money.”
Ms Levy said she wants “to encourage banks and other institutions to use the information they have to advise their customers”.
Her words, spoken at The AFR Super and Wealth Summit, sparked an impassioned reply from ifa’s readership, with many questioning the merits of the Quality of Advice Review (QAR) and the outcomes it could yield.
As such, sister brand ifa approached the Financial Planning Association (FPA), the Association of Financial Advisers (AFA) and the Association of Independently Owned Financial Professionals (AIOFP) to gauge their views and opinions on Ms Levy’s most recent statements.
We bring you their responses in their entirety.
FPA CEO, Sarah Abood
“There’s no doubt at all that professional financial planners are best placed to advise Australians on their financial affairs. One considerable side-effect of the recent reduction in planner numbers is a current significant gap in the accessibility of advice, with under 16,000 financial advisers supporting a country with a population of 26 million.
“To fill the gap, we first need to significantly reduce the unnecessary compliance burden and red tape that inhibits the efficient and effective provision of financial advice. This will help in three ways: it will lower the cost of advice, it will make it possible for planners to serve more clients, and it will also make the profession itself more attractive (helping both to retain existing planners and recruit new ones). Many of the recommendations in the Quality of Advice proposals paper will be helpful in achieving this.
“We understand and appreciate the challenge the review is trying to solve for consumers, particularly for those with basic needs. We see the proposals to allow product issuers to provide simple personal advice (which in many cases was previously defined as ‘general advice’) as one potential part of a solution — but with some important caveats.
“Those caveats are, firstly that the advice should be simple and where the risk of consumer detriment is limited. As an example, it should not include matters such as transition to retirement advice, which can be highly complex, and where getting it wrong can have significant and lasting negative impacts on consumers. Secondly, those providing this simple advice must have appropriate and sufficient education.
“We have suggested that these people should have studied nested elements of a full financial planning qualification. This will help in two ways: it will ensure these individuals have appropriate and relevant knowledge to advise clients on simple matters, and over time it will substantially increase the numbers of fully qualified financial planners who have experience dealing with clients.
“Much successful work has been done to improve the quality of advice Australians access and we must ensure that the proposals don’t risk reversing this.”
AFA CEO, Phil Anderson
“The AFA remain strong supporters of the Quality of Advice Review and the work that they are doing to make financial advice more accessible and affordable. We continue to believe that these proposals will make a material difference to both the cost and ease of obtaining and providing financial advice.
“We appreciate that the proposal to allow people who are [non-relevant] providers to provide personal advice is highly contentious. However, we believe that if this is subject to sensible controls, it will ultimately be beneficial for Australians as a whole, as they will have better access to simple advice. So, the key design issue here is what these sensible controls are, and we think that it needs to be limited to simple advice and that a new and much higher education standard should apply.
“We accept that 16,000 financial advisers cannot meet the financial advice needs of all Australians. We actually believe that there will be little competition between those providing tailored financial advice and those employees of financial product providers who are providing simple advice. If we can accept this, then we can move on and focus on what will make a real difference to the world of professional financial advisers.
“The protestations about these recommendations undoing the hard work of the Hayne Royal Commission are in our view, misguided.
“What recommendations did Hayne make to directly improve the quality of advice? Annual renewal, banning grandfathered commissions, changing breach reporting and the other recommendations, had little, if any, impact on the process of providing financial advice.
“We should not allow Hayne to be the excuse for not fixing the mess that financial advice has become. Quality does not come from following drawn-out processes and complying with red tape. It comes from having the necessary knowledge and skills, a commitment to the client’s best interests, and demonstrating professional judgement.”
AIOFP director, Peter Johnston
“It was initially suspected that Michelle Levy was an appointment by the Liberal Party to allow the institutions back into the advice industry with digital advice by lowering the standards for consumer protection, this now emphatically confirms it.
“Thankfully, Minister Jones will ‘cherry pick’ some of her ideas and bin the rest. What a waste of taxpayers’ money and worse, seven months of wasted industry development time waiting for this confused conflicted diatribe.”