'Treasury must resist watering down hard-won consumer protections', law firm says

The law firm has argued that the provision of any advice, no matter how limited, should be subject to “robust”, “prescriptive” regulation aimed at ensuring consumers are clearly aware of the scope of the advice and the remuneration arrangements.

“We have confidence that the competitive and sustainable financial services market will find ways to provide good quality and affordable advice based on these principles,” the firm said in its submission to the Quality of Advice Review (QAR).

“This, however, will only happen once the industry has fully absorbed the implications of the Royal Commission, and made the necessary cultural changes to ensure consumer best interest is central to service provision – both because they have to, and because it’s the right thing to do,” it continued.

The firm did not hold back, labelling COVID-related red-tape reductions as attempts to achieve “carve-outs” for financial advisers. These, it said, are merely efforts to wind back consumer-focused commitments made in response to the Royal Commission.

“We urge Treasury to at least recommend retaining the current regulatory requirements protecting both complex and limited scope advice,” the firm said.

“Failure to perceive the recommendations of the Royal Commission as the baseline for consumer-focused service would amount to a failure to learn the lessons of the past including those exposed by the Royal Commission.”

The firm also argued that the term ‘general advice’ in its current use is a “misnomer”, which can lead to confusion and poor financial outcomes for consumers.

However, the firm noted that renaming the term will be insufficient in dealing with the problems with the practical circumstances in which advice is provided, which, it said, go beyond semantics.

“We submit that in differentiating ‘personal advice’ and ‘general advice’, the test should expressly be based on the consumer’s subjective belief as to whether the advice is tailored. i.e. that the advice takes into consideration their personal circumstances,” Maurice Blackburn said.

The firm revealed that it commonly sees factual and legal disputes around the extent to which the advice was tailored to the knowledge level of consumer as well as the issue of the consumer’s perception of what they are receiving.

“Often, in our experience, the disclosure of ‘general’ or ‘limited scope’ advice is provided as a written warning without any discussion as to the implications, or appears in the final document. This box-ticking approach often results in the consumer being unable to process what it actually means,” the firm said.

“We believe that it is important that the adviser, who is responsible for clearly setting the parameters of the retainer does so, and ensures the nature of the advice is properly documented.”