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.
‘Too big an issue’: Levy questions whether super funds can handle advice expansion role
The principal architect of the Quality of Advice Review (QAR), Allens partner Michelle Levy, has urged the advice industry to present a unified front to the Federal Government to ensure all the report’s recommendations are legislated.
Addressing a panel session at the SMSF Association’s Technical Summit on the Gold Coast Wednesday, Levy said it needed wholehearted industry support and for advisers to avoid “arguing and lobbying for their own little patch”.
“I know there are parts of this report that people in the advice industry don’t like. I know they don’t welcome other people giving advice, but ultimately there is a lot of good in this report for advisers,” she said. “And it’s overwhelmingly good for consumers – that should be the priority.”
Levy said she believed the Minister (for Financial Services, Stephen Jones) was open to much of the report with nothing off the table. “I’m heartened by that. So, I’m really hoping that the industry will see the merits of it and genuinely support it.”
Levy pushed back, however, on the Government’s decision not to pursue – at least for now – her proposal to bring institutions like banks and insurance companies in to provide personal advice.
Expanding access to retirement income advice by expanding the scope of intra-fund advice for superannuation funds only, without using commercial institutions, drew qualified support from the panel.
Levy agreed in principle but queried whether such a move would overload trustee responsibilities. “It’s going to be really, really hard. I’m sympathetic to the Government’s desire to do something quickly for superannuation fund members, for people of my age approaching retirement and needing help, but I question whether we’re asking funds to do too much and solve too many problems.
“I note the joint ASIC and APRA review of the implementation of the retirement income covenant where they were saying that most funds weren’t responding quickly enough,” Levy added. “I think it’s partly due to the fact we are asking too much of trustees and by doing so we’re exposing members to risk. So, in my view, it can’t just sit with superannuation funds; it’s too big an issue.”
The Government responded to the QAR in June, accepting (in full or in principle) 14 of the 22 recommendations to overhaul financial advice regulation. But the fact it adopted a three-stream approach has many in the industry questioning whether the Government is fully committed to the QAR, especially as it related to exploring new channels for advice.
Levy has not been shy, since handing the report to the Government in February, about this piecemeal approach to her recommendations, in one instance bemoaning the fact the recommendations were “languishing on the minister’s iPad”.
But she struck a more upbeat note at the panel session yesterday, as did her two co-panelists, SMSF Association CEO Peter Burgess and Spiro Premetis, executive director, policy & advocacy, Financial Services Council.
Premetis was optimistic that legislation for the first stream which would remove much of the red tape that increases the cost of advice without consumer benefit could be introduced into the Parliament in the first quarter of next year, with Burgess suggesting it could even happen later this year. Both downplayed risk to the consumer, with Premetis arguing that the advice profession had changed. “You must get a relevant degree. You need to have ongoing professional development. And it’s a competitive market – if you’re overcharging, you’ll lose the client.”
Burgess added that in the association’s discussions with Treasury, he was encouraged by the fact they agreed that advice needed a more principles-based approach and that advisers need to be encouraged to use their professional judgment. “I think it’s really encouraging,” he said. “I’ve walked away from some of those discussions more confident than ever that we’re on the right track.”
