February 1, 2023

IFS welcomes final QAR report but continues to have concerns about consumer protection

IFS was glad to participate in the QAR consultation process. Our input reflects the work we’ve done over the past 29 years providing much needed education and financial advice to members of industry super funds, with IFS now being the largest licensee and advice services provider in the superannuation sector in Australia.

We’re heartened to see that our, and other industry voices during the consultation process have been heard in relation to the deregulation of General Advice, and simplification of consumer disclosure.

Building the Advice industry and protecting Australians

However, we continue to have serious concerns with the recommendation that would allow Personal Financial Advice to be provided by persons that are not Financial Advisers, do not have education standards, are not bound by a Code of Ethics and are not required to act in the best interests of their clients.

We are disappointed that ours, and many other industry voices have not been heard in this regard, and been given only a passing cursory acknowledgement within the report.

Consumers have a right to expect that personal financial advice is provided by a Financial Adviser. A professional, who is registered, qualified, experienced and subject to a professional code of ethics that requires them to act in their best interests. Even the simplest free financial advice provided today by Financial Counsellors requires them to be accredited members of an industry body, qualified and subject to a code of ethics.

Not only does it undermine the professionalisation of the financial advice industry, but we are baffled by a recommendation that winds back years of consumer protection – specifically aimed at the very advice structure that carries the most conflict of interest and that has resulted in the most misconduct - vertically integrated product manufacturers. Surely, we have learned from the Royal Commission and years of regulatory enforcement and legal action.

There is an inherent conflict when an organisation is required to provide the best outcome for consumers, and also to maximise profits for shareholders. This has previously been mitigated by regulatory guardrails such as the best interest duty and financial adviser obligations – to varying success. To strip those away would be detrimental to all.

Other solutions

While we recognise the adviser supply issue that this recommendation is attempting to resolve – there are other ways that support the professionalisation of the industry and maintain consumer protections.

In our submission to Treasury, we outlined a proposed two-tier adviser system, where ‘simple advisers’ with lower education and qualification standards would be able to give ‘simple advice’. This would make entry into the adviser profession quicker and simpler, but importantly, these ‘simple advisers’ would still be registered, bound by the Code of Ethics and Best Interest Duty.

The time to act is now

We whole heartedly support the goals of the QAR, and strongly advocate for both the financial advice industry and Australian consumers. We trust and hope that Government will take the time to carefully consider the proposals, and balance the long-term interests of the financial advice industry and Australian consumers with the pursuit of increased supply of financial advice.

IFS will continue its work to reshape and create novel advice service models to deliver more and affordable advice to Australians through their super fund. We believe that purposeful service design is the key to delivering consumer outcomes – not the regulatory framework.

We believe your members deserve the best retirement. And that starts with financial education, advice and unpaid super recovery – so talk to us today.
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