According to Integra Financial Services co-founder Deborah Kent, some advisers’ expectations regarding the Quality of Advice review were based on a fundamental misunderstanding: namely, that the review was about “making it easier for us”.
“That wasn’t the purpose of the review,” she says. “It was about getting Australians more access to advice. In that context, I think Michelle Levy has done a really good job.” Levy herself made similar observations about the review’s purpose in our recent video interview with her.
Even though the review wasn’t aimed at helping advisers, Kent believes there are multiple recommendations that would benefit the industry if implemented. “Regulatory costs have blown out over the past couple of years,” she says, “and that has made it harder for people to afford financial advice. Addressing some of those costs does help the industry, even if that wasn’t the review’s primary purpose.”
As an example, she highlights getting rid of fee disclosure statements: “They have been a real imposition on clients and the inconsistencies between different providers have led to a lot of paperwork. Making it a standardised form solves a lot of those issues.”
Kent also praises removing the safe harbour provisions, saying this would “make giving advice a lot easier.”
“It removes a lot of extra work,” she explains, “and could allow advisers to look at the cost of advice per client in the future. Similarly, optional SOAs would be a big improvement; the amount of time we put into SOAS at the moment is considerable, especially considering that many clients don’t necessarily even understand them.”
Having said this, Kent still has concerns about the broader implications of the “good advice” model and the expansion of personal advice providers recommended by the review. As she told NMP last year, allowing institutions to offer advice services without the qualifications and standards associated with professional advice could be a backwards step for the industry.
“That’s definitely been a sticking point,” she says. “Allowing super funds and other product providers to give advice without the full education requirements has a lot of advisers worried that clients may not get appropriate advice. Even when we’re talking about ostensibly ‘simple’ problems like setting up an account-based pension, there are broader implications around doing that – will they be taken into account?”
The simple solution, according to Kent, would be to limit the areas of advice that can be given by a non-relevant provider.
However, Michelle Levy expressly argues against this idea in the final report, saying: “I do not think it is possible or desirable for the law to create a boundary between advisers on the basis of whether expertise and judgement is called for in providing particular financial advice or advice to a particular person.”
Instead, Levy recommends that the distinction be based on “the relationship between the advice provider and the consumer” – in other words, whether or not an individual adviser is directly remunerated for their advice (either via fee or commission).
“I don’t know whether the fact of receiving a fee should determine whether the advice is given by a professional or not,” Kent says. “How do we protect consumers from getting poor advice? We’ve tried to answer that question over the years. We’ve gone through a lot of regulatory changes to become a profession and this could water it down a bit for consumers.”
“People should be able to get a certain level of advice from super funds and other providers,” she says, “but when it gets to the point where they need more detailed information, they should be referred to a professional.”
At any rate, Kent isn’t too concerned about the immediate implications of these recommendations – after all, the Quality of Advice review might be getting its own review.
“Based on commentary from the Minister,” she says, “it looks like there will be a review of the final report at some point. It’s difficult to imagine anything happening very quickly, even though some of those ‘quick wins’, like FDS removal, could be addressed immediately.
“I do hope some of those easy fixes get some attention, though, because they’d make a big difference.”
