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Concerns have been raised by the broker association that the government’s new ‘qualified advice’ model will result in product pushing rather than good financial advice.
Peter White AM, the managing director of the Finance Brokers Association of Australasia (FBAA), has voiced concerns about the federal government’s new move to introduce a new form of ‘simple’ personal advice.
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On Thursday (7 December), the Assistant Treasurer and Minister for Financial Services Stephen Jones MP revealed that the government would be introducing a new class of financial advice providers to “support an increase in the availability and affordability of simple personal advice”.
It is expected that this new class – to be termed ‘qualified advisers’ – will generally be employees of licensed financial institutions. The licensee will be wholly responsible for the advice provided.
However, the upcoming category of financial advisers will need to adhere to extra criteria not initially suggested by the review. This involves adhering to an updated best interests duty, ensuring that all individual advice aligns with a unified high standard.
They will be required to meet a government-mandated education standard (yet to be determined). It is expected that there may be a minimum standard of a diploma.
Reacting to the news, the MD of the FBAA stated: “The FBAA is concerned about the announcement that the federal government is introducing a new class of financial advice provider that will allow employees of banks, insurers, and other financial institutions to provide advice under the title of ‘qualified advisers’.
“This presents more questions than it does provide solutions and has the potential to backfire. We know financial institutions and banks will always put profits first and their track record is abysmal. How can an employee of an institution selling a product possibly act in the best interests of the consumer?
“Will these ‘qualified advisers’ give real actual independent advice or limit their advice to their “off the shelf” products? The product they are pitching to the client may well not be in their best interest compared to other products in the financial services arena. So how can they meet any sort of best interests test?
“We also must ask what education qualifications these individuals will be obliged to have. It cannot be less than any financial adviser practitioner, otherwise their advice will be poor and uninformed. The result of this lack of complete knowledge can create poor outcomes and risks peoples’ future including their retirement plans.”
Mr White added that if there is a breach of law, the licensee alone should not be responsible.
“This responsibility and accountability should extend to the individual giving the advice,” he said.
“If not, we know from past experience that the large corporate just pays the fine, gets a slap on the wrist, and moves on.
“I call on the minister to extend the reach of the obligation and recourse and consider these potential ramifications before putting anything in place.
“There are many questions that must be addressed and if this is not properly considered, the adverse impact could be dramatic.”
Mr White’s reaction echoed that of the opposition, with the Coalition having slammed the government for leaving the finance industry with “unanswered questions and lack of regulatory certainty”.
“The government was handed a considered and timely review by Ms Michelle Levy that would have provided safer, simpler, and cheaper financial advice to all Australians. This would have had positive benefits to the economy as well as to consumers,” shadow treasurer Angus Taylor said.
“Instead, the government has delayed, second-guessed the reviewer, and after failing to deliver a response in the budget, finally delivered a full response to what should be a seminal productivity roadmap for our financial advice sector.
“This is both disappointing and unsurprising.”
Similarly, several players in the financial planning sector have voiced alarm at the move.
Sarah Abood, the chief executive of the Financial Advice Association (FAAA), commented: “There is little detail available at this stage, but on the face of it we are deeply concerned at the direction of these announcements...
“Our members fear this could be winding the clock back five years on our profession.”
Ms Abood added that the new ‘qualified adviser’ model “appears to invalidate the hard work and pain that has been involved in creating financial advice as a profession”.
However, others have welcomed the reforms.
The CEO of the Financial Services Council (FSC), Blake Briggs, said: “The government’s policy commitment to abolish the safe harbour steps and simplify statements of advice are key to reducing the excessive regulatory cost burden on financial advice.
“FSC research has shown removing the safe harbour steps and simplifying disclosure has the potential to reduce the cost of providing financial advice by nearly 40 per cent.
“Superannuation funds are an important source of advice for consumers, particularly as they approach retirement and the government’s policy has the capacity to unlock industry investment in retirement advice and low-cost digital advice solutions.
“Every consumer has unique retirement needs and the government’s recent consultation on expanding the suite of retirement income products available to consumers will not be successful without greater access to personal advice at retirement.”
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