Could QAR birth another royal commission

The Institute of Managed Account Professionals (IMAP) is of the opinion that several of the recommendations made by the Quality of Advice Review (QAR) could result in another royal commission in a decade or so.

In its submission to the QAR, IMAP said its review of the consultation paper suggested that the intent of the recommendations is “quantity of advice”, not quality of advice. What IMAP is gravely concerned about is that the proposals outlined by reviewer Michelle Levy could open the doors up to an influx of institutional product flogging.

IMAP chair, Toby Potter, said: “It is IMAP’s opinion that the QAR will reduce the emphasis on the provision of advice by individual advisers in favour of enhancing the capacity for institutions, both private and industry funds, to provide something that represents a new definition of personal advice — ‘good advice’.”

Mr Potter outlined several objections to the proposals, including his distrust of the contentious definition of “good advice”.

“The process of defining it is likely to result in heavy institutional lobbying of ASIC for something substantially less than the current best interest duty,” he said.

Mr Potter also accused Ms Levy of “misunderstanding” how quality services are created.

“She says that the current regime addresses process not outcomes. However, that’s actually one of its strengths,” he said.  

Moreover, he argued that while Ms Levy’s proposals leave individual advisers subject to the Code of Ethics, they remove those constraints from organisations that “don’t even have to meet a ‘good advice’ standard”.

Mr Potter also labelled super’s proposed return to advice a “retrograde step”.

“Michelle Levy's proposal to allow super funds to levy all members, so they can provide ‘free’ advice to a select few, is the very definition of ‘fee for no service’,” he said.

“The advances over the last decade towards professionalism amongst advisers appears to count for little,” Mr Potter continued.

He argued that advisers will be operating in an environment where institutions can provide something that looks like free advice but without being obligated to meet the same standards as personal advisers.

“These recommendations set us up for another royal commission in a decade or so, as we try to unpick why so many retail investors got sold products by institutions, apparently under the guise of advice,” Mr Potter opined.