As Mahatma Gandhi once famously said: “The future depends on what you do today”. And as Gough Whitlam also said, although somewhat less famously: “It’s time”.
Surely, it’s time to burst the ‘badviser’ balloon and exorcise the spectre that badvisers cast on the advice industry, by doing what we can to recognise and acknowledge that the vast adviser population in Australia are committed, competent and centred on bettering the financial outcomes of their clients.
A recent Federal Court decision (R and N Hunter Pty Ltd ATF The Hunter Family Superannuation Fund v Count Financial Limited [2025]) confirmed the traditional wisdom that financial advisers are not necessarily fiduciaries in their relationships with clients, but may well be fiduciary depending on the circumstances in which the advice is given. Whether financial advisers are fiduciaries or not, they are professionals and assume the mantle of trusted adviser in the vein of other categories of professionals.
And yet, there can be a propensity for the uninformed and naysayers to view the adviser profession through the prism of badvisers.
It is ironic perhaps then that a central plank of the Quality of Advice Review platform was to focus on the concept of “good advice”. For whatever reason, key footage was lost on the director’s cutting room floor.
This is not just a vain lamentation; the lost in translation factor has real implications in terms of correcting the myopic and indeed stigmatic opinion which persists regrettably in certain sectors of the consumer population for a multitude of important reasons. One possible explanation for the negative osmosis effect of badavisers is the focus on individual conduct, as advice is given by individuals rather than by corporations.
In fact, much of the “goodness” of the QAR was lost in translation in the production of the new reform legislation.
First, the QAR reforms would have greatly assisted in the much needed simplification of the labyrinthine provisions of the financial advice legislation. A prime example was the proposed simplification of Client Advice Records which was lost in translation. These reforms would have given advisers and consumers more confidence, enhanced productivity and substantially reduced another barrier to accessibility, namely, compliance costs.
A judge once observed (Oreb v Australian Securities and Investments Commission (No 2) [2017]) that under the Corporations Act “professionals and judges must navigate tortuous, mind-numbingly detailed, cascading provisions to ascertain the meaning that the politicians, supposedly, had in mind when enacting these telephone books, at huge costs to the community”.
The Federal Court also commented recently (Australian Securities and Investments Commission v Web3 Ventures Pty Ltd (Penalty) [2024]) on the rule of law and mutual expectations of regulators and users concerning adherence to, and application of, the law. In this respect, certainty of the law is a key imperative.
Clarity, transparency and certainty of obligations of financial advisers are all critical factors in evolving the future of the profession. Many, if not most financial advisers strive and struggle to decipher the Da Vinci Code of the existing legislation. And if they get it wrong, then they can be legally exposed.
There is no current mechanism for advisers or other financial service participants to seek regulatory guidance and perhaps law reform could assist in this regard.
Second, the legal framework of regulation needs to be itself efficient in order to enable advisers to decipher their overarching obligation to provide advice efficiently, honestly and fairly.
Third, the regulatory enforcement system must be in harmony with these elements and continue to focus on badvisers, banishing them to the pits of Tartarus, whilst at the same time being lenient towards goodvisers. It is pleasing that ASIC is focussing on protagonists who fall woefully and wilfully below the gold or platinum standard.
Fourth, the Government need to produce “good” law and foster good initiatives which will assist in encouraging existing goodvisers to stay in the industry, potential goodvisers to join the industry, and badvisers to exit the industry. Floated initiatives such as extending the tertiary education qualifications permissible for entry into the profession are a good example of this.
Fifth, and perhaps most importantly, everyone both within the industry and outside it need to contribute to the proper messaging around the profession; namely that badvisers are a distinct and tiny minority of participants, they will be pursued with vigour and without mercy and the analogy of badvisers as “bad apples” does not exactly translate in practice; badvisers do not by some weird science, infect good apples in the barrel.
In this context, the existing financial services law has a breach reporting obligation which applies where a financial services licensee has reasonable grounds to believe that an adviser attached to another licensee is providing personal advice in breach of certain core financial services law obligations. The relevant provisions of the Corporations Act give qualified protection to such reporters.
However, it is strongly submitted that this reporting regime should be expanded to allow participants in the financial service industry and even people outside of the industry to report advisers more broadly. As ASIC has pointed out publicly the effectiveness of the reportable situations regime depends on a culture of transparency and accountability, and there is scope for broader participation in identifying misconduct.
Last, but very much not least, financial advice must be accessible both financially and in terms of access to qualified advisers. Again, the QAR contains valuable simplification measures which for whatever reason were lost in translation.
Let us as an industry, and as actual or potential consumers of financial advice, focus the debate on badvisers whilst at the same time, promote the reputation and image of the vast proportion and mainstay of financial advisers as trusted and intrinsically trustworthy goodvisers.
Michael Vrisakis is a partner at global law firm Herbert Smith Freehills Kramer.
I agree with Michael that the “bad adviser” problem is overblown – but let’s be honest, it’s always been overblown. What I’m more interested in is examining the incentives within the system that perpetuate this narrative. How many different parties actually benefit from framing every issue as a “bad adviser” problem?
The issue that too few understand is this: just as sunlight is the best disinfectant, liability is the best behaviour modifier. The fundamental problem within our ecosystem is that virtually all liability has been housed within the AFSL. This isn’t an accident – it’s how the system was deliberately built.
In this world, everyone else who works and benefits within the system – product manufacturers, platforms, research houses, education providers, even regulators – can simply go through the motions with their “compliance” obligations, safe in the knowledge that whenever anything goes wrong, all client compensation liability will be taken care of by the AFSL and now its backup system, the CSLR.
When institutions have actual skin in the game – real liability exposure – they tend to pay much more attention to risk. That’s just how it is. Until we address this fundamental misalignment of incentives, we’ll keep having the same conversation about “bad advisers” while the real systemic issues remain untouched.
The “bad adviser” narrative is convenient for everyone except advisers and their licensees. Perhaps it’s time to ask who benefits from keeping it that way.
Ever since the government made its first attempts to improve the quality of advice, all they have succeeded in doing is to add layers of bureacracy to the process of delivering advice as if this would make it more likely that those not playing by the rules would suddenly start doing so.
As a result, advice is only affordable to those who don’t really need it least. Meanwhile, the bad actors continue unchecked. The solution is obvious; simplify the advice delivery process to make it more affordable and, concurrently, take the “big stick” to any transgressors!