Last week, we discussed the terms of reference for the Government’s Quality of Advice review and the chance to revisit and objectively assess the impacts of life insurance reforms on the advice industry.
Obviously, though, the review spans a much wider range of issues than just insurance – topics covered in the terms of reference include ASIC’s regulatory conduct and how regulatory compliance obligations could be simplified, how technology could enable “mass-market adoption of low-cost advice,” whether the safe harbour provision for the best interests duty should be removed and a potential rework of the legislative framework around advice in line with the review currently being conducted by the Australian Law Reform Commission.
Given the review’s broad remit, it’s difficult to estimate the number and variety of recommendations (and subsequent policy changes) it could produce when finalised in December. But the AFA recently argued in a submission, there’s one important thing the review can do differently to many other advice policy consultations that have taken place over the past few years, and that’s take the client’s voice into consideration.
“In recent years,” the submission explained, “the Parliament has introduced additional layers of bureaucracy with little consideration of the impact on clients and whether they value these measures and whether they were willing to pay for them. We believe that this existing client perspective is critical to incorporate in order to make sure advice is affordable and valued by clients.”
Examples of these “additional layers of bureaucracy” included annual renewal, which the AFA said has resulted in “clients [needing] to renew their arrangement with their adviser each year and also sign consent forms that are provided to each of the product providers that are involved. For a couple, this could involve signing six or seven fee-related forms every year.”
The submission added: “Clients no longer have the flexibility to decide the timing of the renewal of their ongoing fee arrangement. This is set by when they first became a client and cannot be changed. The advice process and regulations should support the needs of clients, not make things more difficult for them.”
This part of the AFA’s submission highlights an interesting problem with the way we talk about advice policy (and by “we”, I mean industry bodies, Government figures and even places like NMP). Since the Royal Commission, much hay has been made about the importance of strengthening consumer protections against adviser misconduct – and, conversely, the ways in which those consumer protections may inadvertently affect an adviser’s ability to make a living on an ongoing basis.
But where does the client fit in all this? They are nominally the focal point of so much policy-related upheaval in the advice sector over the past few years, but their voice is rarely represented in the discussion.
At least in my limited experience, if consumers are represented at all, it’s usually those being asked why they don’t see a financial adviser. And while that’s an important viewpoint to have if advisers are to reach the next generation of customers, understanding the impacts of recent reforms on the current client experience is just as critical.
As Clime Investment Management CEO Annick Donat put it recently: “When a client talks positively about their adviser, they say things like, ‘Thanks for helping me understand my situation.’ Or, ‘Thanks for getting me through a difficult time.’ They’re not saying, ‘Thanks for the product recommendation.’
“That’s not what clients focus on, so why is it what we’re focusing on?”
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