Guardrails need to be put in place before implementing some of the Quality of Advice (QAR) recommendations related to non-relevant providers giving ‘good advice’, or Australia will likely face a return to vertical integration, according to The Advisers Association (TAA).
TAA CEO, Neil Macdonald said, ‘While we broadly support the Quality of Advice Review recommendations, we believe great care must be taken before implementing some of them, or we may face a back-to-the-future scenario that did not serve Australians well.’
The guardrails should be around who should be permitted to deliver personal financial advice, the extent of the advice they give, the minimum education and qualifications they hold and the obligation to provide ‘good advice’.
‘It is very clear, particularly as a large percentage of the population nears retirement, that we need to enable more people to give personal financial advice,’ Mr Macdonald said. ‘But while the advice profession continues to debate what the future should look like, industry funds have continued giving advice and are taking over the role previously played by the banks.’
However, the relatively low Statement of Advice (SOA) production from the industry funds sector appears to indicate that general advice is being provided, where personal advice is likely required, especially in preparation for retirement.
‘There is a world of difference between giving people general information and giving them personal financial advice that meets their needs,’ Mr Macdonald said. ‘There is also a risk that general advice will continue to be provided instead of ‘good’ personal advice, and that doesn’t address the issues of the past.’
Mr Macdonald said the QAR recommendation to expand the definition of personal advice to require non-relevant providers to provide ‘good advice’ is a very important consumer protection and must be enforced if there is no Best Interests Duty.
‘If it is not, then complex retirement advice could easily be provided to members of a super fund, without any consideration of issues that profoundly impact consumers in retirement – for example, Centrelink benefits, who and when to move to pension phase, etc.’