IFS outlines QAR consumer protection concerns

IFS has outlined its concern with the QAR recommendation which would broaden the ability of product providers to offer advice.

“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,” IFS said.

“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.”

Similar to consumer group CHOICE, which last week called the QAR final report a “recipe for another royal commission”, IFS also invoked the financial services royal commission, adding that some recommendations in the final report would reintroduce the issues the commission was aimed at stamping out.

“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.” IFS said.

“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.”

In its submission to Treasury during the QAR process, the super fund advice group proposed a two-tier adviser system, which included “simple advisers” with lower education and qualification standards that would be able to give “simple advice”, with the goal of a quicker path into the advice profession.

Crucially, IFS said, the proposed “simple advisers” “would still be registered, bound by the code of ethics and best interest duty”.