Consumer advocates remain opposed to a proposed “good advice” role as recommended by the Quality of Advice Review (QAR) but indicated one of the suggestions regarding lengthy compliance statements deserves further consideration.
The good advice role is “vague and poorly defined”, advocates said in a joint letter to Treasurer Jim Chalmers and Assistant Treasurer Stephen Jones, who is also the Financial Services Minister.
“Rather than reducing regulatory burdens, the introduction of this test is likely to involve a costly transition process as companies try to integrate it into their compliance practices, with significant downtime of certainty until the new test can be explained by the courts.”
The proposed advisory role was one of 22 recommendations made by lawyer Michelle Levy, who led the review and submitted her final report to the Government in December.
Ms Levy said in the report that she deliberately chose the term “good advice” because it describes simply, clearly and directly what consumers want and what the law should require. The proposal, if adopted by the Government, is likely to apply to the provision of general advice to insurance brokers.
He said the proposed new duty test would “encourage better quality advice and give consumers and advisers a clear statement of what they can expect and what they are required to do”.
Advocates say they also “strongly oppose” the proposed weakening of consumer protections in relation to advice given by employees of “unrelated providers” – such as insurers, super funds and banks.
In her final report, Ms Levy said not all personal advice needed to be given by a relevant provider but consumer groups were not convinced.
“If the recommendations of this area review are implemented, employees of large companies such as call center staff will be able to provide advice on complex matters without being subject to a duty of best interests, requirements to educational qualification or a code of ethics,” the joint letter said.
“This will create an environment where the kind of behavior that led to the Banking Royal Commission could re-emerge.”
There are also possible ramifications for general insurance consumers.
“We saw from the Hayne banking royal commission that insurers were cross-selling or up-selling inappropriate insurance that caused long-term economic and social damage to people,” said Choice Head of Policy Patrick Veyret at insuranceNEWS.com.au.
“It is important that critical consumer protections in the general insurance space are not reduced or weakened.”
The joint letter was signed by Choice, Consumer Action Law Centre, Financial Counseling Australia, Financial Rights Legal Center and Super Consumers Australia.
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