Adopt advice review plan now, ASIC can smooth any creases later: Levy pens open letter

Michelle Levy has implored the government to make a call on her Quality of Advice Review recommendations, suggesting that if the proposals require further amendments, ASIC can take care of it down the line.

After being charged with leading the review aimed at increasing advice access and affordability, Levy’s final proposals were put on hold when financial services minister Stephen Jones said he wanted a further round of consultations.

Jones’ trepidation was, in part, due to an outcry from consumer groups such as CHOICE and Super Consumers Australia, who believe opening up advice to super funds and banks under the auspice of Levy’s “good advice” regime will expose consumers to the type of harm uncovered in the Hayne Royal Commission.

But while the government undertakes yet another consultation – the fourth in total that is connected to the review – and with adviser numbers at an all time low 16,000, Levy pointed out that many of the 100,000 Australians retiring every year can’t access financial advice under the current regime.

At any industry event in January she said she told the minister she would refrain from commenting on the review while the consultation took place. Apparently frustrated by what is a four month delay without word from the government, the Allens partner published an open letter in the Australian Financial Review Tuesday morning.

“I have put pen to paper… to encourage the minister and the government to adopt the recommendations in my report,” Levy stated, adding that she worries about the recommendations “languishing on the minister’s iPad”, as well as “bargains and compromises”.

Those potential compromises are being driven by “intemperate” responses from consumer groups, Levy believes, who think banks, insurers and super funds will be able to give “dangerous” financial advice. But their concern is not based on facts, she said.

“The first thing I would like to say about the facts is that banks, insurers and superannuation funds give financial advice today and in many cases, they give that financial advice to sell their products,” Levy countered, referring to the practice of providing ‘general advice’ that doesn’t take into account personal circumstances.

The review’s proposals will actually make it harder for these institutions to give advice where personal circumstances aren’t taken into account, she explained, because any advice will need to be classified as “good advice”.

“The second thing I would like to say is that the recommendations will not mean anyone can give financial advice and they will not mean that the financial advice that is given can be of a poorer quality (to the contrary, it should be better),” she said.

“It is true that some financial advice will not have to be given by a qualified financial adviser. But so much is consistent with the fact that not all financial advice is difficult and some financial advice can be given by an algorithm rather than by an individual.”

That “algorithmic” advice was a factor highlighted by Renato Mota, chief executive at the largest adviser provider, Insignia Financial, earlier in the day. On an Insignia webinar Tuesday morning Mota said advice generated by online or ‘algorithmic’ devices had a dual role to play alongside personal or ‘relationship’ advice, with advisers encouraged to treat algorithmic advice as an add-on to their services.

For Levy, this type of advice technology needs to be trusted as part of the solution. And that solution needs to be adopted sooner rather than later. The 13 recommendations in the review – some of which are widely considered sensible yet impactful administrative adjustments and remain uncontested – provide that solution, she believes. They may not be perfect, she acknowledged, but perfect can’t be the enemy of good when so many consumers are in need.

“If they need some refinement, it is better that that happens afterwards,” she said. “If there is some poor conduct (and there is poor conduct now too), ASIC has all the powers and tools it needs to put a quick stop to it.”

ASIC’s powers don’t extend to legislation, which Levy knows better than most. But she’s also acutely aware that the regulator will set the tone with its interpretation of “good advice”, and place the guardrails with its regulatory guides.

That is where the fine tuning will take place, she believes. Further deliberation is just a waste of time.

Tahn Sharpe

Tahn is former managing editor across The Inside Network's three publications.