Barbara worked two jobs for 13 years to build up a portfolio of blue-chip stocks, but bad financial advice cost her up to $700,000.
Her hard work had allowed to buy shares in a long list of major ASX-listed companies, including the big miners, retailers and banks.
However, after signing up for financial advice with wealth manager Dixon Advisory and Superannuation Services Pty Ltd in 2009, she was eventually convinced to sell-off her portfolio and buy into the company's property fund.
"They said this was the time to go global and it was prudent management of our portoflio," she said.
Barbara has calculated that advice cost her between $450,000 and $700,00 in lost investment and opportunity, depending on market conditions.
"[Her financial advisers] saw a honey pot in us retirees, having all their portfolios. They couldn't resist. We were irresistible," the Sydney-based retiree, who asked not to be identified, told ABC's The Business.
"They tore all my portfolio apart, I was left with nothing but their rubbish, there was no dividends paid.
"I was totally destroyed when I realised what I'd agreed to," she said.
In September, Dixon Advisory was fined $7.2 million by the Federal Court for breaching best interest rules in proceedings launched by ASIC after six representatives failed to act in their clients' best interests and failed to provide advice to their clients' circumstances.
Dixon Advisory went into voluntary administration in January, and ASIC suspended the company's financial services licence in February.
Barbara has joined a class action against Dixon Advisory that's being put together by Shine Lawyers.
Now a proposed overhaul of how financial advice is regulated has consumer advocates — and some in the financial services industry — worried more Australians will suffer heavy losses.
However, those in support of the changes have argued it would make financial advice cheaper and easier to access.
The draft Quality Advice Review released for consultation last month largely backs industry concerns that over-regulation has made financial advice too expensive for most Australians to access.
That review was a recommendation of the Hayne banking royal commission. It was broadened by the Morrison government to look at how to make financial advice more accessible.
The most controversial of the review's 12 proposals is to scrap the "best interests" duty in favour of an obligation to "give good advice".
In 2012, the best interests duty was introduced by the Rudd Labor government after a series of financial advice industry scandals and built upon by the 2018 banking royal commission.
The Quality of Advice Review consultation paper, authored by Michelle Levy, states the best interests duty has not been effective in protecting consumers from poor advice.
"In my view, a more direct and better way to regulate the provision of advice is to start precisely where the current regime does not — with the content of the advice," the paper notes.
"Consumers want good advice — not documents and processes. And advice can be more easily measured and assessed than conduct."
However, consumer advocacy organisations CHOICE, the Consumer Action Law Centre, the Financial Rights Legal Centre, and Financial Counselling Australia have warned the review's proposals would unwind decades of consumer protections.
"These proposals are really quite shocking," CHOICE chief executive Alan Kirkland said.
"That's work that started after the scandals of the global financial crisis, and continued after what we saw in the banking royal commission. And, yet, just a few years after the banking royal commission report, this review proposes [the undoing of all] that good work.
"What the review says is, 'Instead of having a requirement that advisers act in your best interest, they just have to give you good advice.'
"But good advice is defined as advice that puts you in a better financial position. So you could be in a terrible super product with a super fund, you could go and get advice from that super fund, they could recommend that you move to just a slightly better super product, but it could still be one of the worst on the market.
"And that would be considered good advice under this test."
The review also proposes regulating personal advice, and removing general advice as a regulated financial product.
Financial advisers or "relevant providers" who get paid a fee for service would still be required to meet existing professional, ethical and educational requirements.
However, people employed by product issuers such as super funds, banks or insurers, with only some training, would also be allowed to provide advice to customers.
The idea behind the changes is to make financial advice more accessible.
Just over 10 per cent of consumers, or 1.9 million people, see a wealth adviser, down from 13.9 per cent in 2018, according to the 2022 Australian Financial Adviser Landscape Report.
The cost of getting financial advice has soared by 41 per cent in the same period, rising from $2,510 to $3,529.
Abolishing general advice could also make it difficult for the corporate watchdog, ASIC, to crackdown on unlicensed financial advice on social media by so-called "finfluencers".
Financial planners back overhaul
Prominent industry bodies have played down fears about scrapping the best interests duty.
Financial Planning Association (FPA) chief executive Sarah Abood said financial planners and advisers still needed to adhere to a legislative code that included acting in the best interests of clients.
Instead, Ms Abood raised concerns about the obligations of customer service agents giving advice on behalf of product issuers.
"We are certainly in the camp of believing that those those individuals — and those organisations that are providing this advice, not via financial planners and advisers — should have an ethical duty to act in the best interest of the consumers," Ms Abood said.
"That said, we are not opposed to the concept of good advice, we think it makes a lot of sense to be judging the advice by the outcome for the consumer more so than by the process that he's gone through to generate the advice," she said.
Superannuation sector divided
Superannuation funds stand to hugely benefit from the review's proposals, which would allow representatives to give personal advice to members and remove restrictions on customer fees.
Banks and insurers — which largely abandoned financial advice after the banking royal commission — also stand to gain.
Association of Superannuation Funds of Australia (ASFA) chief executive Martin Fahy has welcomed the review's draft proposals.
"What it means is that people who are in a super fund can get advice for that super fund, whether it's now or in 20 years' time, advice that would have been previously quite unaffordable because of the regulatory architecture that was in place and the compliance burden that was in that regulatory framework," Mr Fahy said.
"Under the previous regime, it was about regulating the conduct of advisers, and the focus of very much shifting to regulating the content of advice," Mr Fahy said.
"What that will mean is that consumers will enjoy the protections of a framework, which says, 'Does this advice hold out the prospect of improving your financial circumstances in the long term?'"
However, not everyone in the superannuation industry agrees.
Industry Super Australia (ISA) — which represents 11 industry super funds including HESTA, Australian Super, and HostPlus — has a very different view, and has described the removal of the best interests duty as a catalyst for consumer harm.
ISA said removing restrictions on fees could result in a super fund charging all their members for the cost of providing one retiree with complex retirement advice.
"Giving this type of discretion for funds to provide conflicted advice is dangerous and risks harmful cross-subsidisation for a service that may not be widely used," ISA's submission to the Quality of Advice Review's proposal said.
Ms Abood said that, without an overhaul of the current regime, Australians would continue to be priced out of getting financial advice.
"One example is that advisors, in many cases, now need to disclose their fees eight times to a client in the first year that they engage the client," Ms Abood said.
"And I think that that's an example of regulatory overkill — consumers end up paying the costs of all of those documents being generated and filed and provided to a whole whole range of different providers in the marketplace."
Financial advisers have left the industry in droves in recent years, with the number dropping from 26,500 to 16,671 between 2019 and 2022, according to research from Rainmaker Information.
However, FPA is against the proposal to remove the the requirement for advisers to undertake any additional formal study to meet the mandatory education standards if they meet an experienced eligibility criteria.
Conflict of interest the 'pink elephant in the room'
Much like the superannuation sector, opinion in the financial advice industry is divided about the best way forward.
The Profession of Independent Financial Advisers (PIFA) is one breakaway group that said Treasury's Quality of Advice Review does not go far enough.
"The problem that we've got is that it doesn't really deal with the pink elephant that's in the room: And that is, of course, conflicts of interest. It does nothing to deal with that at all," PIFA president Daniel Brammall said.
Mr Brammall points out the Hayne royal commission made some criticism of the best interests duty and safe harbour that's within it for being a very "check box" approach to regulation. However, he said, the duty should not be dismantled.
Mr Brammall said any reforms must be in the consumer's interest.
"The problems that we've been facing over the last 20 years have been driven almost entirely by deep-pocketed stakeholders who have ameliorated the reforms that have been instituted," he said.
"And, so, what we've got is a patchwork quilt of reforms that really hasn't lived up to [their] original intentions."
"And, I think, if any reforms are going to be implemented, we need to start there, with the pink elephant in the room, deal with conflicts of interest, and further the cause of professionalism and financial advice: So becomes a recognised profession."
Barbara — who left Dixon Advisory in 2019 and has sold all of her saleable investments at a significant loss — said a middle ground must be found between making financial advice accessible and protecting consumers.
"If they're going to, change the legislation or loosen up the legislation, we've got to watch for the shysters," she said.
"But you don't want to pay a fortune, because it just makes the investment you're looking at unviable."
Treasury's final Quality of Advice Review report will be handed to the federal government for its consideration in December.
