What's in a name?

Would an adviser by any other name be just as qualified?

The Government's long-awaited response to the Quality of Advice Review (and the feedback it's received) highlights one of the more enduring problems in financial services regulation: naming and terminology. After all, if the proposed new class of advice providers – licensed through institutions, limited in scope and barred from fees or commissions – are to be called "qualified advisers", one wonders how the current crop should be labelled. 

They're eminently qualified, after all; in fact, since the professional standards regime commenced in 2017, it's become a mandatory component of running an advice business. They're currently categorised as "relevant providers" in the Corporations Act, and Michelle Levy used this term to distinguish between providers of ongoing comprehensive advice and those providing simpler, affordable advice through financial institutions in her interim and final QAR reports.

Is this a meaningful distinction for consumers, though? According to FAAA CEO Sarah Abood, probably not: she described the qualified adviser classification as "self-contradictory and extremely likely to confuse consumers." 

She added: "These ‘qualified advisers’ will provide something that passes for advice for free, confusing clients and obscuring the important differences between information from a partly-trained salesperson, and comprehensive financial advice from a fully qualified professional."

Relevant, qualified, ready to provide

To be fair to the Government, finding the appropriate terminology to describe this distinction was always going to be a challenge. 

This is why so many commentators used the awkward phrase "non-relevant provider" instead of the more obvious (but less flattering) alternative when discussing Michelle Levy's recommendations. But given the impact the FASEA reforms have had on the industry over the past six-or-so years, it's understandable why the "qualified" descriptor might rankle a bit. 

If you think this is all meaningless deliberation over naming conventions, remember that the use and application of financial services terminology can have some pretty serious consequences. Beyond the potential for consumer confusion mentioned above, consider the distinction (or lack thereof) between general and personal advice and the role it played in ASIC’s High Court victory over Westpac back in 2019. 

In its decision, the High Court found that any advice constitutes personal advice if a “reasonable person” could interpret it as such, even if a disclaimer suggests otherwise. Contemporary research commissioned by ASIC also found that alternative labels for general advice "did not make any measurable difference to consumers’ understanding ... and many participants in the research did not notice the label."

In the final QAR report, Michelle Levy used this case to illustrate why "many providers cannot or do not want to provide personal advice," instead relying on "scripted conversations during which providers deliberately avoid asking questions and studiously avoid considering information they have about their customers."

Despite this, she said, many institutions reported that "customers often call looking for advice and they want and expect that advice to take into account the information the institution holds about them or which they volunteer."

Putting aside the concerns around labelling for a moment, this is arguably the exact problem the “qualified adviser” designation is designed to address.

While some of the specifics – referring here to everything from the scope of allowable advice to, well, the qualifications required – have yet to be unpacked, this is as clear a signal as it gets: banks (Westpac and others) can soon get back into providing advice to their customers. 

Once bitten, twice shy

Do they actually want to, though? There’s been plenty of speculation in the years since the big four very publicly exited wealth management – Westpac was, coincidentally, the last one to go – but not much concrete information. Indeed, the last time a bank CEO publicly commented on the implications of the QAR it was to dismiss the possibility of returning to advice.

Back in July, NAB CEO Ross McEwan told a Parliamentary committee that while he believes there is a need in Australia for affordable advice, “we’re out of that space.” 

He continued: “There would have to be quite a dramatic change in the legislation to convince me to go back into that market, and I have no plans to do so at this point in time. We'd have to do it in quite a different way to be able to give affordable advice that was good for customers, which we could actually afford to give as well.”

Would the “qualified adviser” classification represent enough of a dramatic shift to change McEwan’s mind – or persuade any other bank, for that matter?

It’s hard to say, although for what it’s worth, the Australian Banking Association issued a statement praising the Government's QAR response earlier this month, arguing that the proposed reforms will "allow for Australians to speak to qualified advisers in financial institutions and receive simple advice, with strong safeguards in place."

ABA CEO Anna Bligh said that "too many Australians seeking simple financial advice have not been able to receive it in a cost-effective manner," adding that past advice reforms have had the effect of "[putting simple advice] out of reach for most Australians, millions of whom are at or approaching retirement age."

Unmet demand

The peak bodies for life insurers, general insurers and super funds – the other industries suggested by Treasury as providers of qualified advice – have been similarly enthusiastic about the Government’s proposals. 

Both the Council of Australian Life Insurers and the Insurance Council of Australia welcomed the final QAR response. ASFA has yet to comment on the latest news, but deputy CEO Glen McCrea said super funds were "well-placed to deliver the financial advice that consumers want and need" when Minister Stephen Jones presented to the association in June. 

None of this is necessarily indicative of when (or if) any of the underlying institutions will start providing “qualified advice”, but there is a common theme: all report that their customers are looking for advice. And that’s personal advice, not the “scripted conversations” Levy referred to in her report. 

It stands to reason that at least some of the banks, insurers and super funds represented by the above bodies will attempt to meet that demand. If and when that happens, Australians may finally get the “high quality, accessible and affordable financial advice” envisioned by the Quality of Advice Review.

Almost, anyway – they’ll get “high quality, accessible and affordable qualified financial advice.” And if they need something more comprehensive, well, they’ll just have to find someone more qualified.