Financial services lawyer Michelle Levy, who led the Quality of Advice Review (QAR), has responded to consumer groups opposed to proposals she made in her final report, particularly in relation to the creation of a “good advice” duty and expanding the definition of personal advice.

Ms Levy says her concerns over the eventual outcome of her report prompted her to pen an open letter to explain why her recommendations, if taken up by the Federal Government, will ultimately benefit Australians.

The Government released the final report publicly in February after receiving it in December and has said it will consult on the proposed measures before making its response.

“I have been worrying a lot about the fate of the recommendations and the conversations that are happening behind closed doors,” Ms Levy told insuranceNEWS.com.au.

“For the same reason the review was worth doing, I believe they are important and so I want to do everything I can to make sure the Quality of Advice Review doesn’t go the same way as the Henry Tax Review.

“The only thing I have to work with are words and so I decided to write some more in an effort to persuade the Government to adopt them.”

In her open letter Ms Levy says her recommendations are “supported by reasons and evidence” and based on a “close examination of the law, long experience with its application and wide consultation”.

“The best reason I can come up with to explain the response of the consumer groups is that they think it will be easier for banks, insurers and superannuation funds to give financial advice and they think that is a bad thing, indeed, based on the media releases, a dangerous thing,” her letter says.

“But if that is the right explanation, it is not based on the facts.”

Consumer groups say her good advice duty proposal is vague and poorly defined and warn of weakened consumer protections if her final report is taken up by the Government.

Ms Levy says at present insurers, banks and super funds provide financial advice and in many cases they do so to sell their products.

A large part of the advice is termed “general” – as legislated by current laws – and does not take into account a customer’s circumstances. It also does not have to be in the best interests of the customer.

“If the recommendations are adopted, it will be harder for financial institutions to give advice that does not take into account their customer's financial situation,” the letter says. “That will increase the quality of advice and it is a very good thing for consumers.”

Ms Levy says creating a “good advice” duty to replace the existing “best interests” duty requirement will lead to consumers getting fit-for-purpose advice.

“Good advice will be advice that is fit for the customer’s purpose,” her letter says. “Poor or even ‘average’ advice is not good advice.

“The provider will need to think about the needs, and even the ‘interests’, of the customer and I am left scratching my head about why anyone is worried about replacing the best interests duty (which very few people understand) with a good advice duty for institutions that provide financial advice to their customers.”

In closing her letter Ms Levy says she worries “about the recommendations languishing on [Financial Services Minster Stephen Jones’s] iPad and I worry too about bargains and compromises”.

“These are bad outcomes for consumers,” she says. “And so I have put pen to paper (or more accurately set my fingers to work on the keyboard) to encourage the Minister and the Government to adopt the recommendations in my report. If they need some refinement it is better that that happens afterwards.”

insuranceNEWS.com.au has reached out to Mr Jones’s office for a comment.