AMP pitches three-tiered approach to advice

In its submission to the Quality of Advice Review (QAR) proposals paper, AMP pitched the idea of introducing a three-tiered advice framework to promote “consistency of standards and quality” across the broad professional advice community.

The three tiers proposed by AMP include fully qualified personal advice from a relevant provider, personal advice from a product provider, and digital advice.

“As a first principle, AMP is supportive of proposals that make quality financial advice more accessible and affordable to more Australians,” the AMP submission said.

“Regulations currently make it difficult for Australians to request and receive financial advice, particularly where the requests for financial advice are simple and limited in scope.

“The proposed amendments to the regulatory framework will provide more Australians access to good financial advice and with further discussion on implementation, we believe they can be made while also maintaining a high level of consumer protection.”

AMP’s proposed top tier would enshrine the term “financial adviser”, with individuals lacking the “highest education standards” barred from using this title. This, the wealth manager said, would create a clear separation between the different tiers.

Tier one would also retain FASEA professional standards and the obligation to issue a Financial Services Guide (FSG) as a “simple method of communicating the financial advisers’ ‘capacity to advise’”.

AMP’s proposed second tier of advice would encompass product providers who would be able to deliver personal advice that relates to the products issued by the provider, using the information they hold on the client.

Individuals operating within this tier would not be identified as financial advisers but by “some other standard title”.

The wealth manager proposed that “minimum prescribed education standards” should apply to this tier.

AMP, however, stressed that some restrictions must apply to this tier, particularly regarding retirement and aged care advice, which it said should only be provided by a qualified financial adviser due to the skill and experience required.

The third tier proposed by the firm encompasses digital advice, with AMP noting it supports the proposals outlined in the consultation paper which allow Australians to access personal advice through digital tools.

The firm proposed that the Responsible Manager framework “should ensure the provider has suitably qualified and experienced individuals in building the application and associated algorithms as well as close monitoring and supervision of the output”.

It also suggested that statutory capital requirements for digital advice tools should be introduced, depending on the number of clients being advised.

Moreover, AMP proposed that an FSG equivalent should be provided at the beginning of the user experience to outline the capacity to advise with appropriate warnings around limitations of scope.

At the time that the QAR consultation paper was released in late August, Matt Lawler, director of advice at AMP, said: “The consultation paper acknowledges what we and many in the financial advice profession have been saying for some time, that over-regulation has had a severe impact on the ability of advisers and licensees to provide an accessible and affordable service to Australians.

“In our view, the pendulum had swung too far.”