The Australian Banking Association (ABA) has supported separating product from advice.
In a submission to the Productivity Commission (PC) inquiry into Competition in the Australian Financial System, the ABA has specifically pointed to the proposed renaming of ‘general advice’ as a vehicle via which separating product from advice can be achieved.
It has specifically stated that the term ‘advice’ should not be available with respect to product recommendations.
“The ABA strongly supports a full review of the definition of financial product advice under the Corporations Act,” the ABA submission said. “The review should seek to redefine advice, as advice that takes into consideration personal circumstances, and should remove the link to product recommendations and focus on wealth advice, investments, insurance and other financial planning topics including aged care, estate planning and budget management.”
“The term ‘general advice’ should be withdrawn and replaced with a new term covering factual information and marketing,” the submission said.
Elsewhere in its submission the ABA urged against further empowering either the Australian Securities and Investments Commission (ASIC) or the Australian Prudential Regulation Authority (APRA) with respect to competition.
“The ABA does not believe the draft report has established that there are gaps in the regulatory architecture that lead to lack of effective consideration of competitive outcomes in financial markets,” it said.
“The ABA most strongly rejects the finding that there should be a ‘party’ to be specifically authorised to take on responsibility for representing competition, to do so would add cost and complexity in the financial system with no analysis that any such reforms have would work or is necessary in Australia financial system,” the ABA said. “All regulators should work to increase competition, with Treasury taking the overall lead cross-agency reforms.”
Comments
Separating product from advice, finally. Hopefully by this they mean attacking 'Vertical Integration', cause that's what it really is. The "No Brainer", the "Elephant in the Room". Would you go to a Doctor who is licensed through a Drug company? Would you be surprised to find that the Doctor who is licensed through aMerck, or Phizer, Roche, etc only recommended that companies drugs? or 75% of the doctors patients ended up with prescription for drugs from the company that the Doctor was affiliated with. Would we call this professionalism? or Drug Sales?
Doctors are a poor example Michael. They generally write prescriptions for the Pharmaceutical companies that offer them holidays (or conferences), give them pens, clocks and other promotional gear and tell their patients not to buy the identical "plain label" generic drugs some pharmacies offer. GPs refer you to their mates who are specialists, that buy them dinners and more in recognition of the number of referrals they provide. So no, we cannot really call them professionals either. Another industry that deserves more scrutiny. That's not to say vertical integration is good, it's not, only that incentives are everywhere. Always have been. Would you think politicians accept invites to sporting events, corporate boxes and the like without knowing it is also an incentive to support a corporation or a cause?
Hear, hear! The main difference is the AMA is an extraordinarily closed and strong force to be reckoned with, so they let their 78 year old GP members continue to practice phrenology where the industry bodies of other professions are more fractured.
(Cough Cough) No polly would accept a payment or donation. If they did they would have to declare they were biased. of course if you are running the country - bias is OK.
Banks, doctors, lawyers, accountants and a few others easy to name are relics of the age of paternalism - 'we know best'. This comment by banks shows the ongoing impact of the information age on paternalistic behaviour. Financial advisers - if their professionalism evolves properly - could be the core advocates for the way people plan their future. To do that they need to step outside the narrow boundaries of financial expertise and embrace a more holistic approach to advice. This is happening (in areas like aged care) but needs to gather momentum rapidly. An important step is to engage with each individual through negotiating their likely time frame, identifying their opportunities and challenges and securing their properly informed commitment to decisions. A danger lies in accepting a too narrow definition of advice through the current (well-meaning) efforts of FASEA and others.
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