FAAA’s Sharpe applauds Jones, labels Levy’s recommendations as consumer ‘detrimental’

The Financial Advice Association Australia (FAAA) chair, David Sharpe, has labelled the Financial Services Minister’s response to the Quality of Advice Review (QAR) a “pragmatic approach” and said the minister “should be commended”.

Speaking to Channel Nine, Mr Sharpe explained that the QAR is “really complex” and expressed his appreciation for Stephen Jones’ approach, underscoring the potential consumer detriment that could arise from some of the recommendations made by Michelle Levy.

This is the first time the FAAA has labelled some of Ms Levy’s recommendations as potentially detrimental, with particular reference to her suggestion that superannuation funds, banks, and insurers should increase their role in advice.

“The Levy recommendations, there is potentially a lot of consumer detriment, so he [Jones] has taken the view that those things that are easy to implement and maybe of great consumer benefit, let’s get those done quickly. And those that maybe take a bit more time, let’s take our time to make sure consumers aren’t worse off,” Mr Sharpe said.

Speaking to a small audience of superannuation fund CEOs and senior industry executives last week, Mr Jones revealed the government will accept 14 of the 22 recommendations made by the QAR lead Michelle Levy.

The government’s legislative response to the QAR will be divided into three streams, with stream one to prioritise the removal of red tape for advisers, while stream two charts a path for superannuation funds to expand their provision of advice. Stream three groups the remaining eight recommendations that the minister wishes to dissect further.

Speaking of the areas of Mr Jones’ response that have been warmly received by advisers, the FAAA chair expounded on the importance of culling red tape in the industry.

“We have this ridiculous scenario of this red tape, these long, lengthy documents adding no benefit, costly to consumers, it’s basically a consumer detriment, not a consumer benefit,” Mr Sharpe said on statements of advice.

“Every profession needs to have guardrails and consumer protections in place but what we’ve seen from the minister is an acknowledgment that the regulatory environment that advisers work under is just simply overcooked, and just needs scaling back.”

Touching on Ms Levy’s original recommendations, Mr Sharpe said that they almost gave carte blanche access to super funds “to do what they want” in advice, with unqualified employees.

“I think the minister has identified the fact that we want to make sure that there is a minimum level of education and the level of complexity that super funds can provide. Look, a really simplified analogy, what we see in medicine is that we can get simple advice not from a doctor, whether it be a physio or pharmacist, right down to even the packaging we see with our paracetamol, which has dosage instruction, but when it’s a level of complexity, we still see our doctor. I can see that playing out here,” Mr Sharpe said.

“Simple advice, go to your super fund. Anything with any material complexity, still see a qualified adviser.”

Ms Levy has previously argued against such observations in her recommendations, many of which she has referred to as misrepresentations.

Speaking just this week on the government’s QAR response to ABC News, Ms Levy had a very different response.

She emphasised that the eight recommendations that have been placed on ice by the minister are the “core recommendations” that underpin her entire report.

“It’s somewhat disappointing because I think the eight are the most important. They are the ones that will really help make advice more accessible to more people,” she said.

On Mr Jones’ decision to allow superannuation funds to expand their provision of advice, Ms Levy said: “It’s really hard to know what those changes will look like”.

“The minister had made an announcement, but we don’t have detail about what that will look like.”

Acknowledging the importance of receiving advice in retirement, Ms Levy questioned whether Mr Jones’ announcement pertaining to super funds would genuinely incentivise them to provide advice.

“I’m not entirely confident,” Ms Levy said.

Ms Levy also reiterated that she does not have a conflict with the minister but opined that his response seems to indicate a failure on her part to persuade him of the merits her recommendations hold for consumers.

“I’ve done my job and he is doing his. I am not aware of any conflict or tension,” she added.

Ms Levy submitted her final QAR report to the government on 16 December, and while the minister has finally revealed the government’s response, more consultations have been announced delaying the final QAR response until the end of the year.