Although it widely supports the recommendations from Quality of Advice Review lead Michelle Levy, the Association of Financial Advisers has requested an adjustment to the proposal that allows non-relevant providers to provide financial advice.
Levy’s proposals were made public at the end of August and she clarified much of how her regime would work in a webcast hosted by Professional Planner.
Releasing its submission to the advice review, the AFA pointed to this proposal as one of the few weak spots from her paper.
“The most contentious issues in the package have been the proposal to allow people who are not relevant providers (financial advisers) to provide financial advice and to broaden what can be provided under intra-fund advice,” the association stated in a summary of its proposals published on Thursday.
The statement went on to say while the association doesn’t support the proposals in the way they have been presented, they do believe it could work with careful modification, noting that the roughly 16,000 advisers currently in the industry cannot meet the advice needs of all Australians.
“We, therefore, accept that framework could work with sensible controls including limiting it to simple advice and with a new higher education standard being applied to people who provide personal advice who are not relevant providers.”
Nothing to risk
The AFA, which includes risk advisers as part of its membership, is still concerned about the recommendations Levy will make for life insurance commissions which she has left until the final proposals paper.
Levy has stated the reason it could not be included in the interim proposals was because she was still awaiting data from the regulators to make a recommendation.
“We will continue to advocate for the retention of commissions and also put forward ideas for how the provision of life insurance advice can be more economically viable, particularly for those younger clients, and those with simpler needs who do not pay as much in premiums,” the AFA stated.
Former financial services minister Jane Hume placed the Life Insurance Framework review into the Quality of Advice Review which would review the use of commission for risk products.
Current financial services minister Stephen Jones had been critical of retaining any form of commission structure in the industry but has since softened his stance.
“This will be an important focus area for us over the next few months in the lead-up to the finalisation of the QAR report in mid-December,” the AFA stated.
Plenty to support
Despite the criticism, the AFA is welcoming of the proposals including the “rationalisation” of the Best Interest Duty, the consolidation of fee disclosure statements and fee consent firms, and the removals of Statements of Advice and Records of Advice.
“We appreciate that the move from a Best Interests Duty to a good advice obligation is controversial, however, we think that there is much in this that can be implemented to achieve better outcomes for clients and to simplify the advice process.”
Instead of having multiple fee disclosure statements and fee consent forms, Levy recommended a single consent form for advice fees deducted for more than one product from a product issuer.
“We support a range of other proposals including the change in the definition of personal advice and the removal of [Design and Distribution Obligations] reporting obligations. As a package, these reforms could significantly reduce the cost of providing financial advice.”
