Vanguard is of the opinion that in order to support the diverse needs of Australians, advice and guidance should be available from multiple different sources and in different formats, including directly from product issuers, digital platforms, and ecosystems or through a financial adviser.
In its submission to the Quality of Advice Review (QAR), Vanguard slammed Australia’s legal and regulatory barrier to advice and labelled the Australian regime as “out of step” with the current state and future direction of law reform in other jurisdictions.
As such, with the aim to remove these barriers and promote increased access to affordable advice, the investment manager has proposed a complete revamp, including the replacement of the current definition of financial advice with a “sliding scale” of regulatory compliance ranging from unregulated information to lightly regulated “personalised guidance”, followed by limited advice through to comprehensive advice.
According to the investment manager, personalised guidance would encompass customer engagement by product issuers and digital platform providers that is intended to help current and prospective customers in their decision-making process under an “educational style, self-directed model”, devoid of expert advice recommendations.
Vanguard explained that the difference between guidance and advice would be dealt with through disclosure to the customer rather than seeking to define the line between “general advice” and “personal advice”.
“The other key distinction between guidance and advice is that guidance would provide options for a client to consider but would not deliver a singular recommendation as an advice service would,” the investment manager noted.
Moving on to comprehensive advice, Vanguard explained that it would be unchanged conceptually from the current definition of personal advice and would be subject to an “overarching” best interest duty and related appropriate advice and conflicts priority obligations.
Conversely, all advice other than comprehensive advice would be limited advice.
“The difference between the two types of advice would not be determined by the consideration of the customer’s objectives, financial situation or needs, which is the current basis of the distinction between general advice and personal advice,” Vanguard said.
“Rather, limited advice would be any advice that is limited in scope, limits the extent of the customer’s relevant circumstances that are considered in giving the advice or limits the products that are considered and compared in formulating the advice recommendations.”
Moreover, Vanguard has called for the replacement of the statement of advice with a “shorter, less prescriptive disclosure” delivered in different formats and in technologically neutral ways.
These recommendations, the investment manager noted, would “better align” the Australian financial advice regime to the US and UK regimes where, it said, there have been greater offers and take up of innovative digitally enabled guidance and advice models.
