Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
Good advice foundation to shift from ‘reasonable benefits’ to ‘fit for purpose’: Levy
Despite not anticipating any “big changes” in the final Quality of Advice Review paper to be handed down on December 16, Michelle Levy doe anticipate a subtle yet significant language change to the proposed ‘good advice’ exhortation that better accommodates the full spectrum of personal advice in the new era.
Instead of ‘good advice’ being that which is “reasonably likely to benefit the client”, as per the draft consultation paper released in August, Levy told advisers at the Financial Planning Association’s national congress on Wednesday she’s mulling a definition based on it being fit for purpose.
“It’s got a long history of meaning…” the Allens Partner said, noting the terminology – which has its origins in British consumer protection law – dates back to the 19th century.
“But what I like about it is it adjusts to whoever it is that you are advising and who is giving that advice,” Levy (pictured, left) said during a fireside with FPA chief executive Sarah Abood. “I think it copes much better than what I was thinking about with that full diversity of advice that is given, and I want to encourage so that that’s one thing that I’m shifting.”
Levy explained that while the quality of advice being provided by financial advisers is sound, the system of advice she envisages – with a broader definition of personal advice designed to bring banks, super funds and insurers into the mix – will require a similarly broad foundation.
If ‘good advice’ is to replace best interests duty while also opening the gates to institutional product providers, the duties involved will need to fully match the breadth of that task.
“One of the things to keep in mind is financial product advice is the regulated thing. It covers a vast range of conduct and it ranges from the conversations that a person has with an officer at a bank or insurance company through to a financial planner or a stockbroker,” Levy said.
“The things that worries me a lot is not what you’re doing as financial advisers, but what people get every day when they speak to a financial institution, and what they get is often very unhelpful general advice,” she continued. “My proposal in the paper is that more… personal interaction will be all treated as personal advice. So… that remains. Then I’m dealing with… the risk that you get less advice. So you need to then adjust the duties that apply to that personal advice.
Making it clear an expansion of advice providers is the only way to achieve the access and affordability advice mandate she was given, while not diluting quality or inviting consumer harm, Levy reminded the audience of 500 or so advisers that the proposals needed to look at the “full universe” of people that will be giving it.
“And I think that does need to be people’s financial institutions,” she said.
