Consumer groups lash Michelle Levy’s advice reforms

The financial sector wants the government to push ahead with a package of reforms recommended by Allens partner Michelle Levy but consumer groups have criticised the report.

Federal Assistant Treasurer Stephen Jones wants to ‘get the balance right’ on recommended reforms. Picture: Gary Ramage

The financial sector has increased pressure on the federal government to push ahead with a package of reforms recommended by Allens partner Michelle Levy that would ease constraints on financial planners and open up the sector to banks and super funds.

But consumer groups have criticised the report, with Choice chief executive Alan Kirkland calling it a “recipe for another royal commission” by “exposing consumers to unacceptable risk when obtaining financial advice from a bank or super fund”.

Mr Kirkland said the report’s recommendations were “radical and untested changes at a time when global financial markets were unstable”, which would be “a disaster”.

Financial Services Minister and Assistant Treasurer Stephen Jones announced plans for consultation on the Levy report, which recommends a streamlining of regulations to make advice accessible and affordable.

These include scrapping requirements for financial advisers to provide detailed statements of advice to clients, and easing other requirements around disclosure and consent around fees. Other recommendations were for advice to be provided by a broader range of groups subject to an easier “good advice test”, and making it easier for superannuation funds to provide more advice to members. Mr Jones said the government wanted “to get the balance right” in any changes it made to the law around financial advice.

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

But the move to require more consultation on the recommendations, which were produced after a lengthy consultation process by Ms Levy, was criticised by opposition financial services and assistant treasury spokesman Stuart Robert, who accused Mr Jones of “squibbing it”.

He said the further delays in making changes to the legislation following the report was “denying Australians the opportunity to seek affordable, quality advice at a time when most Australians are already finding it tough to meet the cost of living”.

Allens partner Michelle Levy. Picture: Nick Cubbin

Financial Services Council CEO Blake Briggs ­described the report as “an independent, consultative and thought­ful review process (that) has delivered a blueprint for reform of the advice industry that puts consumers first”.

Mr Briggs said the report, commissioned early last year by the Morrison government, had “outlined sensible reforms consistent with the detailed and evidence-based policy research conducted by the FSC and its members”.

The Financial Planning Association of Australia called on the government to act on the report as quickly as possible.

FPA chief executive Sarah Abood said it was “imperative” that the government acted quickly on the report, “as the current regulatory framework is complex, hard to understand and costly to comply with”.

“Too many Australians are currently unable to access the quality, affordable advice that they need,” Ms Abood said. “This is in large part due to the onerous and sometimes contradictory requirements that have been imposed in recent years, and which are acknowledged in the report as not meeting their goals.”

She said the FPA particularly welcomed Ms Levy’s recommendations on simplifying ongoing fee arrangements and enabling planners to consult and agree with clients on how they would like their advice to be delivered.

But a spokesman for the Consumer Action Law Centre said consumer groups were “extremely disappointed” with many of the proposals in the review.

“The review has been presented with clear evidence that conflicts of interest contribute to poor-quality advice, but is proposing the status quo,” he said.

Choice’s Mr Kirkland said the big banks and super funds would be the greatest beneficiaries of the report. “They will be able to undercut independent professional advisers by pushing out cheap and shoddy advice on a mass scale, provided by unqualified staff,” he said.

He said the proposed changes to the tests for the quality of advice “would add even more complexity in the system” and become a “lawyers’ picnic”.

Renato Mota, CEO of ASX-listed financial services company, Insignia Financial, said the recommendations would “help make financial advice more accessible and affordable”. He said: “Many Australians are looking for affordable, accessible financial guidance, which the current system is not able to deliver.

“Consumers are often looking for advice on single and specific financial matters and the current regulatory framework makes it difficult for them to access this.”

“We recognise many of these recommendations work as a package and would encourage them to be implemented together.”

The chief executive of one of the country’s largest super fund, Aware Super, Deanne Stewart, welcomed the release of the report as “providing the blueprint needed to unlock advice for all Australians.”

“At Aware Super, we believe a revision in the regulatory framework that allows for a change in the way advice is provided will help us best meet the needs of our members.

“It’s simply not possible for the current regulatory framework to support the amount of advice Australians need and want, in the way they want it provided.”

The chief executive of ASX listed wealth company, ClearView, Simon Swanson, said the recommendations would “go a long way” to achieving the goal of making advice more affordable and accessible, “by removing unnecessary complexity in the system and reducing the compliance burden on advice businesses.”

Financial Counselling Australia chief executive Fiona Guthrie said she was concerned about the report’s recommendation to continue to allow commission-based selling for insurance products.

“Any regime that allows commission-based selling is a concern, but in the case of financial products, we know it’s particularly risky,” Ms Guthrie said.