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The major bank has said it will carefully evaluate the potential impact of the proposed changes on its role in the realm of financial advice.
While the big four banks have mostly been reluctant to disclose their position on the government’s endorsement of an expansion in their advisory powers, the Australian Banking Association (ABA) has welcomed the changes on their behalf.
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In a statement, the ABA said that simple, cost-effective financial advice has been out of reach for many Australians for some time.
“While previous reforms were well intentioned, the result has been that simple financial advice has been put out of reach for most Australians, millions of whom are at or approaching retirement age,” said ABA chief executive Anna Bligh.
In this context, Ms Bligh welcomed the government’s announcement that bank workers could soon form a new class of financial advisers, called a “qualified adviser”, via the completion of a yet-to-be-specified diploma.
These reforms, she said, will allow Australians to speak to qualified advisers in financial institutions and receive simple advice, with strong safeguards in place.
NAB has been the only big bank to directly address Michelle Levy’s Quality of Advice Review recommendation, which pushed for the banks to return, with Ross McEwan, the bank’s CEO, telling the House standing committee on economics in July that the change in legislation would have to be “dramatic” to “convince” the bank to “go back into that market”.
“We’re out of that space,” Mr McEwan said.
“It would have to be quite a change in legislation to twist my arm to go back into it.”
However, in a statement provided to our sister brand ifa, a spokesperson for the bank hinted that NAB would be assessing its position in due course.
“NAB is still working through the details of the government’s financial advice reform package,” the spokesperson said.
“Financial advice is a critical service to Australians and it’s important the industry is set up for success.
“We will take the time to assess how the proposed changes may be reflected in the modified advice model we currently provide.”
NAB was the only bank to provide a statement on the matter.
CBA had referred to the ABA’s statement and indicated that it was still premature for the bank to disclose its thoughts in detail.
Westpac, on the other hand, declined to comment, while ANZ is yet to respond.
Other product providers have been quite welcoming of the changes, with AMP stating that it welcomed the “comprehensive roadmap” offered by the government.
“The removal of the safe harbour steps in favour of a principle-based approach to the best interests duty will empower financial advisers, lead to new channels for the delivery of financial advice, and make advice accessible to many more Australians,” said AMP chief executive Alexis George.
The creation of a new type of financial adviser has alarmed many in industry, with Peter White AM, the managing director of the Finance Brokers Association of Australasia (FBAA), suggesting that the move would result in product pushing rather than good financial advice.
Reacting to the news in December, 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[s] 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.”
[Related: FBAA flags ‘concern’ with new advice model]
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