Levy surprised by the extent to which advisers feel under siege

Michelle Levy was appointed to lead the Quality of Advice Review (QAR) in March and wrapped up her duties in December, having submitted her final report to the government.

Recounting her experiences during the review to PritchittBland Communications this month, Ms Levy said she was most surprised by the extent to which the individual advisers feel under siege.

“To an extent, I think their feeling is justified because the system — the law, the regulator, product issuers and licensees — does look to individual financial advisers to address misconduct in the financial services industry. This might be appropriate if the type of misconduct we have seen over and over again (most recently with Dixon Advisory) was caused by poor or fraudulent conduct by individual advisers. But that is not the case and therefore it is both unfair and unlikely to be effective,” Ms Levy told PritchittBland Communications’ new blog series, Finsider.

“One of the themes of the Royal Commission was that misconduct in the financial services industry was not the result of a few ‘bad apples’. Instead, it was pervasive and structural. The financial system was set up to reward selling and profit. And so to really protect consumers from poor advice, we need to start with the conduct of the product issuers, not the financial advisers,” she said.

When asked what she thinks are the most important issues facing the industry today, Ms Levy said trust and value are both significant problems.

“Many consumers do not understand the financial services industry; they do not know what the various participants do and they do not know how they can help them. What they have seen are the scandals,” Ms Levy said.

The result, she opined, is that consumers not only don’t value the industry but that they don’t trust the participants.

“And so consumers rarely seek financial advice and when they do they do not want to pay for it — or they do not want to pay an appropriate fee for it”.

As for how Ms Levy has managed to reconcile the different viewpoints in the QAR, she told Finsider that it was not her job to come up with a compromise between the interests and views of different industry stakeholders.

“I thought about how the changes that were advocated for by stakeholders would affect consumers and asked the question: ‘Would consumers be more likely to be able to access good quality financial advice if this particular change was made?’” Ms Levy explained.

“I also thought about what harm might flow, again to consumers. This is not to say I disregarded the interests of the industry participants, but their interests were and are relevant only to the extent they can help serve the interests of consumers.”

Looking to the future, Ms Levy said she would like to see several changes in the financial advice industry over the next 12 months, including that advice is delivered to consumers in a language and form they understand and want.

“This means I would not see any more 50-page statements of advice filled with jargon and templated text”.