While the big four banks have not yet disclosed their position on the government’s endorsement of an expansion in their advisory powers, the Australian Banking Association (ABA) has welcomed the changes on their behalf.
In a statement issued last week, the ABA said that simple, cost-effective financial advice has been out of reach for many Australians for some time.
“While previous reforms were well-intentioned, the result has been that simple financial advice has been put out of reach for most Australians, millions of whom are at or approaching retirement age,” said ABA chief executive officer Anna Bligh.
Highlighting this disparity, she emphasised that Australians have been exposed to potential harm, resorting to “completely unregulated channels” in their quest for essential financial guidance.
“Sadly, Scamwatch data shows 60 per cent of reported scam losses are from investment scams,” said Ms Bligh.
In this context, Ms Bligh welcomed the government’s announcement that bank workers could soon form a new class of financial advisers, called a “qualified adviser”, via the completion of a yet-to-be specified diploma.
These reforms, she said, will allow Australians to speak to qualified advisers in financial institutions and receive simple advice, with strong safeguards in place.
“The ABA welcomes initiatives that will ensure Australians will be able to receive simple advice that is high quality, helpful, and safe.”
While the ABA’s endorsement of the government’s proposal suggests that its members are on board with what Financial Services Minister Stephen Jones announced last week, the banks have formally remained silent.
To date, NAB has been the only big bank to directly address Michelle Levy’s Quality of Advice Review recommendation, which pushed for the banks to return, with Ross McEwan, the bank’s CEO, telling the House standing committee on economics in July that the change in legislation would have to be “dramatic” to “convince” the bank to “go back into that market”.
“We’re out of that space,” Mr McEwan said.
“It would have to be quite a change in legislation to twist my arm to go back into it.”
While Mr Jones revealed the government’s policy stance on Thursday, the legislative materials are not expected until an unspecified time in 2024, allowing banks the option to withhold their plans until they have access to the detailed legislation.
Mr Jones’ announcement last week came as a surprise to many, particularly Australia’s 15,670 advisers, to whom he had consistently conveyed his lack of support for the return of banks and instead advocated for the expansion of advisory services by superannuation funds.
In October, in an exclusive interview with InvestorDaily’s sister brand ifa, Mr Jones said that banks aren’t an obvious providers of advice.
“I think the banks have exited a whole heap of the advice space for a good reason and they’ve made commercial decisions based on their own risk appetites and where they want to take their businesses,” Mr Jones said at the time.
“They may want to review some of that down the track, but that will be a matter for them. I am not here to try and work out what’s in a bank’s commercial interest.”
Instead, the minister emphasised his commitment to prioritising the best interests of consumers and said that in evaluating this, he found no compelling reason to reintegrate banks into the system.
“It’s not obvious to me the banks are the first port of call people planning their retirement are going to go to. Yes, they may have a role but I don’t think it’s a central role,” the minister added.
During the same interview, the minister hinted at having conducted discussions with banks and insurers and reiterated that super funds would have the initial priority.
“There’s no doubt if you’re able to crack it in super funds we can create some models which might be applicable,” he told ifa at the time.
“I’ve also been pretty pragmatic and I said to the life insurers, and to the banks, ‘Tell me what you want to do, that you can’t do’. Let’s try to solve real problems without having to go to the effort of setting up major regulatory overhauls, let’s look at what you want to do that you think you can’t.”
Yet on Thursday at an invite-only event held at Parliament House, attended by ifa, Mr Jones announced the creation of a “new class” of financial advisers, creating an opportunity for banks to re-enter the advice sector alongside super funds and insurers.
In a surprising departure from his previous statements, the minister laid out a roadmap reminiscent of darker times, proposing the creation of the designation “qualified adviser”, a category that, he said, would generally consist of employees of licensed financial institutions.
“We must give consumers what they actually need,” the minister said on Thursday.
This announcement not only caught the advice community off guard but also stirred up old wounds, with the prevailing perception that it effectively rolls back some of the tough rules established by the Hayne royal commission, the impacts of which have deeply hurt advisers.
On Friday, in response to InvestorDaily’s request for comment, CBA referred to the ABA’s statement and indicated that it was still premature for the bank to disclose its thoughts in detail.
