The government and ASIC are demanding banks and financial service providers strengthen their scam and fraud defences. With this nefarious activity costing Australians $318 million in the past 15 months alone, the industry’s positive response has not come quickly enough.
With industry funds feeling the heat from APRA, it’s likely more members will look for a better option, especially if they are nearing or in retirement. Those choosing to do so need to tread warily.
QAR leader urges government to adopt recommendations now, refine them later
Following recent comments by financial services minister Stephen Jones casting the fate of the Quality of Advice Review (QAR)’s proposals into question, review leader Michelle Levy has urged the government to adopt her final recommendations, saying that if refinement is needed, “it is better that that happens afterwards”.
The Australian Securities and Investments Commission (ASIC) “has all the powers and tools it needs” to stop any bad conduct that may arise in the meantime, and the QAR recommendations can achieve their purpose in their current form, Levy said, adding that letting them languish would lead to “bad outcomes for consumers”.
The Allens partner, charged with leading the review aimed at increasing advice access and affordability, submitted her report of 13 recommendations to the government last December. Since then, however, Jones has asked for a further round of consultation on the recommendations, delaying any decision on them.
That move followed pushback from multiple consumer groups, including CHOICE and Super Consumers Australia, which argued that opening up advice to super funds and banks under the auspice of Levy’s “good advice” regime would expose consumers to the type of harm uncovered in the Hayne Royal Commission.
But while the government undertakes what will be its fourth consultation 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.
‘Not all financial advice is difficult’
Apparently frustrated by what is a four-month delay without word from the government, Levy 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.”
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.
While she acknowledged the review’s recommendations may not be perfect, Levy said they represent a solution that can help consumers today – with refinement possible down the road.
“In the meantime, the recommendations will, if adopted, achieve their purpose and the purpose of the review – to help more people get good financial advice as and when they need it.”
