SIAA welcomed the Quality of Advice Review proposals as ‘thinking outside the square’ on financial advice and has constructively raised issues requiring further consideration.
“We agree that the current regulatory framework is a significant impediment to consumers accessing financial advice and simply ‘tinkering around the edges’ of the Corporations Act will not deliver worthwhile regulatory reform”, said Judith Fox, SIAA CEO. “Our members have expressed in-principle support for the proposals as the changes are focused on the consumer needs and wants.”
However, SIAA points out that to be successful, the proposals will need to result in a reduction of the cost of providing personal advice and the regulatory complexity of doing so. SIAA has also raised concerns about the possible unintended consequences of removing general advice and the need to ensure consumers are not disadvantaged.
“Let’s consider online brokers, whose clients have chosen a low-cost model of investing that does not include personal advice. What happens with the research reports on listed securities including an opinion or recommendation to ‘buy’, ‘sell’ or ‘hold’ a security that currently comprise general advice?” said Ms Fox.
“Those reports are valued, but they go to all clients. Under the proposals they are captured by the new definition of personal advice. We would not want to see online brokers forced to halt sending these to their clients due to the concern that this will be considered to be personal advice. Clients lose out if that happens.”
The proposed new test for personal advice is that the client has received good advice, being advice that would be reasonably likely to benefit the client, having regard to the information that is available to the provider at the time it is provided. The question arises as to whether the outcome will turn on the advice received, as proposed, or on the regulator determining what good advice looks like.
SIAA has called for a ‘bright line’ between the circumstances in which a full-service stockbroker provides advice that is subject to the best interests duty and one in which a call-centre operator provides ‘good advice’.
“The ‘bright line’ will need to take into account the limitations inherent in advice provided by a call-centre operator who is not subject to the Code of Ethics, best interests duty and education and professional standards that apply to full-service stockbrokers,” Ms Fox noted.
“It will be important that the review provides additional examples that ‘flesh out’ how licensees and advisers will develop and assess advice that satisfies the new best interests duty alongside the new ‘good advice’ duty,” she concluded.
SIAA commended Michelle Levy and the review team at Treasury for the depth of engagement with stakeholders. SIAA’s response can be found here.
Judith Fox, CEO
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