The federal government’s final response to the Quality of Advice Review (QAR) has drawn a mixed reaction from the financial services industry, with praise for efforts to cut red tape and expand the provision of affordable financial advice tempered by concerns about the quality of advice provided under the proposed model.
While the Financial Advice Association Australia (FAAA) supported the replacement of statements of advice and removing the safe harbour steps, it was less enthusiastic about the move to allow financial institutions, such as banks, insurers and superannuation funds, to dispense financial advice.
“There is little detail available at this stage, but on the face of it we are deeply concerned at the direction of these announcements,” FAAA chief executive Sarah Abood said.
“Our members fear this could be winding the clock back five years on our profession. It appears to invalidate the hard work and pain that has been involved in creating financial advice as a profession and winning the trust of consumers.”
Specifically, Abood said the proposal to allow designated ‘qualified advisers’ of financial institutions to provide advice as one facet the FAAA found problematic.
“There is no detail on the qualifications that would be required, however, they would be substantially less than what is currently required to provide financial advice. Thus, the proposed term is self-contradictory and extremely likely to confuse consumers,” she noted.
“These ‘qualified advisers’ will provide something that passes for advice for free, confusing clients and obscuring the important differences between information from a partly-trained salesperson and comprehensive financial advice from a fully qualified professional.
“In summary, we believe that legislation as drafted will have very little impact on reducing unnecessary processes, paperwork and compliance steps.”
In contrast, Stockbrokers and Investment Advisers Association chief executive Judith Fox supported the move to expand the provision of financial advice to a larger sector of the industry, believing it would help to fulfil an advice need for many Australians.
“The current lack of access to quality and affordable advice for most Australians can lead to consumer harm, with the advice gap being filled by social media, scams and unregulated guidance,” Fox noted.
“We support financial institutions as well as superannuation funds being allowed to give customers simple, quality personal advice, with safeguards built in to ensure consumer protection. We are pleased to see that the minister also recognises the important role that digital advice will play in increasing consumer access.”
Financial Services Council (FSC) chief executive Blake Briggs welcomed the government’s announcement to implement the outstanding recommendations of the QAR, suggesting the proposal would remove regulatory restrictions and provide a pathway towards more affordable financial advice in the industry.
“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,” Briggs said.
He added allowing super funds to provide advice would lead to better outcomes for those approaching retirement in light of Treasury’s recent announcement to explore the role of superannuation savings in retirement.