Levy hits back at Choice over its criticism of her financial advice recommendations

Allens partner Michelle Levy says consumer group Choice’s response to her financial advice report is ‘high handed and inflammatory’.

Providing financial advice should be simplified and opened to a broader section of the financial industry, the Levy report suggests.

Allens partner Michelle Levy has accused consumer group Choice of making remarks which were “high handed and inflammatory” about the implications of her report on the law around the provision of financial advice.

Choice warned that the recommendations in her report on her Quality of Advice Review, which was released by the federal government last week, could be a “disaster” for consumers who were in danger of getting “cheap and shoddy advice”. It said it could pave the way for another royal commission into misconduct in the financial services sector.

Speaking on Wednesday at a seminar in Sydney hosted by the Actuaries Institute, Ms Levy said her recommendations, which include the scrapping of the need for financial advisers to provide long statements of advice and making it easier for groups like superannuation funds to provide simple financial advice, were aimed at making financial advice more affordable and accessible.

“Contrary to what Choice asserts, they will improve, rather than decrease the quality of financial advice by requiring recommendations given to individual customers to meet the needs of that customer,” she said.

Ms Levy said it was “not feasible or necessary” for the provision of financial advice to be restricted to the 16,000 professional financial advisers in the country.

Allens partner and report author Michelle Levy. Picture: Nick Cubbin

She said the current situation could lead to “very poor outcomes” for consumers, including cases of misselling of financial products.

She said she had “tried hard” to convince Choice of how her recommendations would benefit consumers but Choice’s media release on her report had painted a “truly terrifying picture” of her recommendations, calling them “radical and untested.”

“It’s not hard to see Choice’s media release as high handed and inflammatory,” Ms Levy said.

“It is also hard to respond given that there are no reasons for the views.”

Federal Financial Services Minister Stephen Jones has promised to consult widely.

While describing the current situation around the provision of financial advice as a “hot mess”, Mr Jones said the government wanted “to get the balance right” in any reforms, following the receipt of the report which was commissioned by the previous Morrison government.

“While protecting Australians from dodgy financial advice, we don’t want to make it harder to get sound advice,” Mr Jones said.

Ms Levy’s comments highlighted the divisions now forming about her recommendations, particularly that a much broader range of people should be able to provide personal financial advice and be subject to different standards than professional financial advisers.

In an interview with The Australian this week, the chief executive of the $150bn super fund, Aware, Deanne Stewart, strongly supported the recommendations, saying that critics needed to remember there had been a considerable increase in the amount of regulation in the financial advice sector in recent years.

She said reforms were needed to the regulations around the provision of financial advice, a sector which was currently “on life support”.

Assistant Treasurer and Financial Services Minister Stephen Jones. Picture: Gary Ramage

In her remarks on Wednesday, Ms Levy said her review was made against the backdrop of the broader regulatory framework around the provision of financial advice, including the Corporations Act.

She said banks and other financial institutions already gave their clients general advice when they were selling their products but were unable to provide any advice which took into account their personal situation.

Instead, potential customers would have to go to a third person — a professional financial planner – if they wanted specific advice on whether the product was suitable for them.

She said this could lead to “very poor” outcomes and misselling” where people were sold financial products which were not suitable for them.

“The customer should not have to go to a third person to decide whether the product is suitable for them,” she said.

Ms Levy’s report recommends that banks, super funds, insurance companies and other financial institutions be freer to provide “personal advice” which took into account the specific circumstances of their customers.

In this circumstance, she said, those giving the advice should be obliged to provide “good advice” but should not be subjected to the same stricter controls and standards required of professional financial planners who are required to act in the best interests of their clients.

In the case of the staff of these organisations, Ms Levy said the companies themselves were under legal obligations to ensure the good conduct of their employees.

She said her recommendations would require these people to give “good advice”.

But she said it would be a matter for the financial institution to oversee just how their employee provided “good advice” to their customers.

Ms Levy’s recommendations also include giving super funds more discretion on how they charge for financial advice, the simplification of rules around the disclosure of fees by financial advisers and advice only be given in writing if it was requested by clients.

Originally published as Levy hits back at Choice over its criticism of her financial advice recommendations