Super funds group IFS says proposed industry changes could undo two decades of work

Superannuation funds group Industry Fund Services says some of the draft proposals in the Levy report into financial advice could undo two decades of regulation.

An industry superannuation fund group has criticised some of the draft proposals in the Levy report into the quality of financial advice, warning that they could undo two decades of regulation of the sector and undermine consumer confidence in financial planners.

“We do not support the deregulation of general advice,” said Csaba Baranyai, chief executive of Industry Fund Services which provides financial advice support for industry funds.

“Any type of advice about financial products or circumstances poses a risk to consumers and should be regulated.”

The proposals were contained in a paper released on Monday by Federal Financial Services Minister Stephen Jones.

Mr Baranyai said the proposed deregulation would “open the door to unqualified persons who may have significant influence over their audience, providing poor and harmful advice to consumers that may be influenced by product sponsorships”.

IFS fears deregulation could allow to unqualified people to exert significant influence.

He said IFS found it “perplexing” that the inquiry, headed by Allens partner Michelle Levy, would recommend that people who were not qualified could provide financial advice.

“This proposal is regressive, undermines two decade of regulatory direction, and will undermine consumer confidence and the uplift of financial planning as a profession,” he said.

Mr Baranyai said the proposal was like suggesting that legal and tax advice could be provided by anyone, even if they were not unqualified, as long as it was “good”.

“Consumers must have confidence and be able to trust that the person from whom they are receiving personal advice is qualified, experienced and acting in their best interest,” he said.

“Personal advice is not less important, complex nor less potentially damaging in the wrong hands than legal or tax advice and should be treated accordingly.”

Mr Baranyai said IFS did not support the proposal to scrap a requirement financial advisers provide annual fee disclosure statements for ongoing advice.

He said the annual statement was a “key transparency measure” which was necessary to keep consumers informed on how much they were paying and for what service.

Insignia Financial chief executive Renato Mota. Picture: Stuart McEvoy

But Mr Baranyai said IFS did support other recommendations, such as an obligation financial advisers provide “good” advice, proposals to make it easier for super funds to deduct advice fees from member accounts, and proposals to simplify written advice given to people by financial advisers under the current complex Statement of Advice.

Releasing the consultation paper, Mr Jones said the current regulations on the provision of financial advice were “working for nobody”.

The paper has received support from other sections of the superannuation and wealth management industry.

Insignia Financial chief executive Renato Mota said it contained “encouraging proposals to improve accessibility and affordability of financial advice”.

Clearview chief executive Simon Swanson. Picture: John Feder

Mr Mota said Insignia supported the view that consumers wanted good advice, “not documents and processes”.

He said his company would be “looking closely at the concept of moving from the current complex process to a framework that requires the provider of financial advice to provide good advice”.

Mr Mota said the process for reform of the financial advice sector still had a way to play out.

“We look forward to continuing to be part of this discussion as we focus on improving the financial wellbeing of Australians,” he said.

ASX-listed wealth company ClearView’s chief executive, Simon Swanson, said the review proposals “provided a good basis for discussion” for the future of the financial advice sector.

He said the proposals could lead to the removal of a lot of “ridiculous paperwork” which provided more work for financial advisers and pushed up the cost of providing advice to consumers.

He welcomed the proposal to scrap the need for detailed statements, which he said resulted in consumers given more than 70 pages of advice in some circumstances – most of which they never read.

SMSF Association chief John Maroney. Picture: AAP

Mr Swanson said the proposed changes could allow advisers to have “more meaningful” discussions with their clients at a cheaper rate, in the same way that lawyers could have regular discussions with their clients.

He said the recommendations in the review “ticked a number of boxes” for reform of the sector but he said the “devil” would be in the detail of the final proposals.

Self Managed Superfund Association chief executive John Maroney said the proposals were a “breath of fresh air” which could, if implemented, underpin the professionalism of the advice industry making the consumer its primary focus.

He said the paper offered a “pathway for the advice industry to be able to focus on consumer outcomes and not be burdened with excessive regulation.”