‘Never felt out of my depth’: Levy confident she was right to lead review

Having being part of three regulatory shake ups in the advice industry, Quality of Advice Review lead Michelle Levy never doubted she was the right person for the role.

Speaking at the PritchittBland Communications annual new year event in Sydney on Tuesday night, Levy said she was aware of the criticism of her being appointed to the role, being a lawyer and not an adviser or part of a licensee.

“Most of the time I read that comment or question; one occasion in a consultation meeting someone actually asked about that and I was a bit taken back,” Levy said.

“I’m not able to answer the particular question about me, but what I am able to say [is] at the end of the process is that I never felt out of my depth. I have lived and breathed this stuff.”

She added she lived through FSR, FOFA and the Hayne Royal Commission so she was well aware of the evolution of the industry.

“I hope that question [of my appointment] has been answered,” Levy said.

Levy added this was a review of the regulatory framework and ultimately required a lawyer with deep experience, and the recommendations “do not reflect a synthesis” of suggestions from stakeholders, but instead reflect her assessment of what should be changed in the regulatory framework.

“My role wasn’t to be a mediator and it wasn’t to try and come up with a compromise between the different views of stakeholders,” Levy said. “My role was to recommend changes which would improve the accessibility and affordability of advice.”

Noting the criticism of her appointment or proposals, she conceded she mistakenly ignored advice she was given which was to avoid some of the faceless and toxic feedback she would receive.

“In addition to the consult process, on occasion I made the big mistake of reading the comments at the end of articles,” Levy said.

Key findings

The final report has been delivered to financial services minister Stephen Jones, but Levy said she agreed with the minister the findings of the report should not be discussed until the minister has released his statement.

“I was happy to do so – not only because it gave me a break from thinking about financial advice but also because it would give [the minister] the opportunity to read them without the noise of other people’s views.”

However, prior to submitting her final proposals she said not to expect any wholesale changes from the original proposals paper.

Reflecting on the terms of reference of the review, Levy said “there [were] too many questions, but it got the process started”.

“We had a 130 or so submissions and we started meeting with advisers and industry associations and banks, insurers, super funds, wealth managers and consumer groups,” Levy said.

“I locked myself up and wrote a couple of hundred thousand words which might be one reason why the minister hasn’t released the report yet – he might be still wading through it hoping it will end soon.”

Levy echoed comments made by Treasury last year that the current regulatory regime has been built off the back of prior misconduct.

“What I have recommended is based not only on an intimate knowledge of the existing regime but leaving through all of them events that have led to it, the crimes and misdemeanors we might say, but that doesn’t mean the regime should remain as is,” Levy said.

No unanimous fix

Levy said although no one is happy with the current regulatory regime, the solution to fix it led to a varied spectrum of solutions.

“Financial advisers struggle with what they see fairly as a large regulatory burden which they say hinders rather than assists them to do their jobs – that is to give advice to their clients,” Levy said.

Her comments echoed the same sentiment she expressed at the Professional Planner Licensee Summit last year, that advisers are struggling in the prescriptive regulatory environment due to fears of running afoul of the regulator.

“Their response has been to increase fees to cover their costs, act for wealthy clients who want ongoing advice or, in many cases, leave the industry,” Levy said.

She added that, in short, no one told her things were going well, but that the industry hoped for quick wins through reducing some red tape via eliminating statements of advice or annual fee consent requirements, for example.

“But none of these changes would make good financial advice widely available, and some I worried would affect – in a bad way – the quality of advice,” Levy said.

“Some other people were skeptical about the value of advice and others said more advice should be provided by government agencies or a specialist government agency.”

While most of the professional associations, licensees and large advice groups have been vocally supportive of the recommendations, consumers groups have been the most critical of the changes.

“I heard from consumer groups, both directly through submissions and discussions and through what I read in the media; it’s fair to say they were not supportive of some of the proposals that were in my paper,” Levy said.

“I’ve never doubted their good faith and their intentions that they want to pursue the interests of consumers but so do I, but I was worried about some of the views they expressed.”

Consumer groups had been particularly vocal about any changes to safe harbour steps or best interest duty, as well as the retention of commissions for risk insurance.