The report shook the financial advice industry after unveiling some unsavoury practices that were responsible for various scandals over the years.
However, Phil Anderson, general manager for policy and professionalism at the AFA, said the report does not take into consideration the full picture.
“There is no acknowledgement that there are many good advisers or the benefits that they deliver for their clients. There is no acknowledgement of the relatively small number of complaints received by the Australian Securities and Investments Commission (Asic) and External Dispute Resolution schemes.
“They don’t appear to have spoken to either good advisers or their clients and it was not part of the terms of reference. It seems that they only looked at where things went wrong.
“In our December 2018 further submission, we offered to introduce them to some good advisers so that they could develop a genuine balanced understanding of the value of financial advice.
“Like much of what we told them and suggested, it was not taken up,” he added.
The value of financial advice
One of the main points made by the Royal Commission report was the widespread practice of the so-called ‘fees for no service’ and ‘invisible’ fees for advice.
But, according to Anderson, that is not really the case.
“There are repeated references to the ‘invisibility’ of ongoing financial advice fees where they are paid from a product account, and a misunderstanding about what product providers require to facilitate a payment to an adviser.
“This suggests that the Royal Commission did not understand and has not reviewed the application forms in a product disclosure statement or seen application forms where clients sign to demonstrate their approval for the payment of ongoing advice fees from their accounts.
“We explained the authorisation contained in the application form in our submission; however, once again, this was ignored.”
Painting a ‘disturbing’ picture
Anderson said that all financial advisers should be concerned about the statements made in the report.
Although the Royal Commission can help deliver fundamental change and help “make financial advice a genuine profession”, its opinion is “disturbing”, Anderson added.
“[There are] clear and significant emotional benefits emerging from the advice experience. A major element of the advice value proposition relates to peace of mind and greater confidence in managing finances,” he said, quoting research conducted by AFA in 2018 about the value of financial advice .
“There can be no doubt that what the Royal Commission has said about financial advice, both fair and unfair, will have a long-term impact.”