RC Failed to Understand Value of Advice – AFA


The Association of Financial Advisers has taken issue with what it says is the Banking Royal Commission’s failure to understand the value of financial advice.

AFA GM Policy & Professionalism, Phil Anderson

In a statement released this week, AFA GM Policy and Professionalism, Phil Anderson, says all advisers should be concerned about the way financial advice has been described and treated in the Banking Royal Commission’s Final Report, citing a number of statements to support his argument, including:

“The [financial advice] industry has moved from scandal to scandal, causing financial harm to clients, and damaging public confidence in the value of financial advice.” The Banking Royal Commission Final Report (the Final Report), page 120.

Anderson notes, “The Final Report does not acknowledge that there are many good advisers or the benefits that they deliver for their clients. It does not acknowledge the relatively small number of complaints received by ASIC and External Dispute Resolution schemes. There does not seem to be an understanding that adviser remuneration, both upfront and ongoing, must be approved by the client, in writing, otherwise it can’t be paid.”

Anderson’s statement drills down into value of advice arguments relating to:

  • The overall value of advice
  • The value of ongoing financial advice
  • Ongoing superannuation advice
  • Intra-fund advice

Referring to the overall value of advice, Anderson says the AFA went to particular lengths, in many of its submissions to talk about the financial, emotional and behavioural benefits of financial advice, “…however it appears that this fell on deaf ears. They just seem to have little idea what a good adviser does for their clients or understand the impact that they can have on the financial and emotional outcomes for their clients.”

He said an example of this ‘lack of understanding’ is highlighted in the following statement about the value of ongoing advice on page 143 of the report:

“Absent extraordinary external events or radical change in the client’s personal position, it would be very easy to provide the service {annual review} with little time and little effort. And, as pointed out above, the less work that is done, the greater the financial advantage to the adviser.

He also notes that there is disapproval in the final report about the sale of financial advice businesses, and that there was no consideration by the Royal Commission of intra-fund advice, despite what Anderson believes to be the inherent risks with conflicts of interest.

Interested advisers can click here to read the full statement released by the AFA this week.


  1. The statement made on page 143 would be correct if it was not for the burdensome regulatory and compliance requirements foisted on us by ASIC and the Licensees lawyers interpretation of requirements. Hayne is right, if not for the regulatory requirements, i could conduct such a review in a 30 minute phone call and post out a switching form. As we know however that would land you in gaol without a license. Even a simple portfolio rebalance requires a letter to go out to advise the client their review is due, a meeting with the client to determine whether in fact there have been any changes, copious note taking to record that meeting and everything that is discussed. Completion of a scoping document to record what is in and out of scope and record the fact that anything not in scope carries risks and these were adequately explained to the client. Modelling to decide on recommended changes, preparation of working papers to prove that you considered alternative strategies and products prior to making a recommendation and that the clients current products and recommended strategies remain suitable, the preparation of the relevant documentation (we do everything as an SoA now to avoid the risk that we address something in an RoA that has not previously been addressed in an SoA), follow up meeting with client to present the advice and copious note taking to record all the discussions and the clients reaction to the advice, collect various signatures on Authority to proceed, switching form and Opt in agreement and then actually arrange the transactions and follow up with product providers to ensure they are completed correctly then finally check over the file to ensure that everyting is in order and BID has been followed. Finally, put it all away until next year.

    • I agree Simon. Our annual review process typically requires around 4 hours from start to finish. If amendments to advice are required then the process can blow out considerably. Mr Hayne really did have no idea what he was talking about.

      • No truer statement made around this Simon – you’re quite correct when you say “Mr Hayne really did have no idea what he was talking about”. It is inexcusable that he was chosen for this job (no coalface experience) and inexcusable that he did not decline to continue in the position once he (hopefully) realized he was wholly inadequate for the task. LOTS of fuel here for conspiracy theories and for once it would all be correct! Look at who chose him and the agenda thereof . . .!

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