The AFA has taken Choice to task over the consumer group’s submission to the Quality of Advice Review, with the association calling out a number of assertions made in the document.
Choice, which represents the interests of consumers and has been a noted critic of the advice industry in recent years, said conflicts of interest remain in the advice industry that “continue to contribute to poor outcomes for many people”.
“What proof do they have that this is true in the post FoFA/LIF/Professional Standards and Annual Renewal era?” asked the association, noting that the Hayne royal commission (cited as evidence by Choice) focused only on the conduct of large institutions rather than individual, non bank-aligned advisers.
The AFA called into question the veracity of research conducted by Choice, which surveyed its own members and the general public (“they claim”, the association notes) about their views on advice.
“None of these people are current clients of financial advisers and they clearly lack an understanding of the current regulatory regime,” the AFA stated. “To understand what financial advice clients really think about their advisers, they should survey real advice clients. We know from a number of research reports that the existing clients of financial advisers value their advice relationship and trust their adviser.”
On Choice’s opposition to proposals around winding back the safe harbour steps, which many view as redundant in light of FASEA’s Code of Ethics, the association stated: “Seemingly they are oblivious to what is happening in the marketplace, including the decline in the number of advisers, the increasing cost of financial advice and the difficulty that many Australians are having in accessing financial advice when they desperately need it.”
The AFA also took exception to the consumer group’s stance on life insurance commissions, which the association characterised as “total ideological opposition”.
Choice’s opposition to asset-based fees also “goes to the next level, in terms of unfounded claims and inaccuracy”, the group stated.
In particular, the below passage in Choice’s submission riled the AFA: “Once established, asset-based fees do not provide an incentive to provide ongoing services to the client, because the financial adviser is paid regardless. They have consistently been a source of poor consumer outcomes for decades, and have driven disastrous business models.”
“These are extraordinary claims,” replied the association, “with no evidence provided and fail to acknowledge the existence of Fee Disclosure Statements and now the Annual Renewal obligation.
“If Choice really thinks an adviser can get away with providing no service, but still get clients to sign the annual renewal and consent forms, then they are harshly judging the common sense of the hundreds of thousands of existing clients who pay for ongoing advice on the basis of asset-based fees.” the response continued.