AIOFP slams QAR best advice
The AIOFP has once again taken aim at the Quality of Advice Review.
The Association of Independently Owned Financial Professionals’ (AIOFP) executive director, Peter Johnston, said that “all issues seem to be contingent on eliminating the best interests duty and replacing it with the best advice concept”.
In the QAR consultation paper, the review lead Michelle Levy defined “good advice” as that which “would be reasonably likely to benefit the client, having regard to the information that is available to the provider at the time the advice is provided”.
The AIOFP said that this change would not be in the best interests of consumers.
“We think institutions should receive a strictly worded legislated carve out where internal staff can discuss internal products with consumers and the government should not capitulate to pressure from the institutional lobby and their aligned associations,” Mr Johnston said.
“We are the first to agree that institutions should be allowed to have trained internal staff explaining/advising on their own internal products with consumers, it makes sense. But in order for this to happen, the Corporations Law needs to be changed to accommodate best advice and eliminate best interests.”
He added that the change to best advice would open the door to institutions providing conflicted advice and “re-commence masquerading as independent advisers to dupe consumers, a return to the bad old days one could say”.
The AIOFP’s expert adviser on legal, compliance and advice issues, Lionel Rodrigues, added: “There is a view that some ‘carve outs’ may be necessary for the ‘institutions’, however, that or they are defined. As the Corporations Act now stands, that would be difficult to achieve.
“This situation is made even more difficult by a recent and significant judgment which was decided by the High Court in 2021 on appeal from the Full Federal Court. However, the decisions by the two courts also provide statutory clarity, and may provide a solution.”
Citing the outcome of the Westpac High Court case that saw the bank fined $10.5 million, Mr Rodrigues said “the institutions should not be allowed to masquerade or disguise what consumers deem to be ‘advice’. The courts have been very clear that only factual information can be given”.
In an open letter to Ms Levy in November 2022, the AIOFP said the banks should stay out of advice “of any description” and stick to what they do best — “standard banking, administration, management activities”.
“In fact, when you consider how poorly the banks have performed in the wealth space over the years with inflicting consumer capital losses, no advice will be better than getting advice from them for most consumers,” Mr Johnston said.