The Quality of Advice Review’s recommendation to make it easier for super funds to offer personal advice to members is likely to result in more doing so, particularly as their members approach retirement.
“We need to consider these proposals across the full range of ways that our fund will help our members, from education to what was general advice type areas, through intra fund propositions through personal advice propositions,” said Sarah Forman, group executive, advice at Aware Super.
“We have 100,000 members who are going to retire in the next four years. We want to make sure that as we analyse and consider the implications of these proposals, we’re not just thinking around comprehensive personal financial advice, we’re actually thinking about the implications across the full range of those offers.”
The chairmen of AustralianSuper and Australian Retirement Trust also publicly stated last week the reforms could result in super funds providing more advice to members.
Rethinking business models
The simplification and proposed broadening of the definition of personal advice will encourage funds who have previously been reluctant to provide general advice to members to do so said Duncan McPherson, general manager at Link Advice.
“I think they will look at the proposals favourably. However, I think we still need to ensure the education and professional standards of providers remains high so consumers can maintain their confidence in the advice they’re receiving.”
Digital advice, seen as a good introductory service for members who are starting to take an interest in superannuation, is also likely to be expanded under the proposed changes.
“What has been proposed really enables digital advice to play its role in the industry, which is to provide people with easy access to information, guidance and simple advice,” said Link Advice’s McPherson.
Super funds are also likely to rethink their call centre service models as the proposed changes categorise conversations with members as personal financial advice.
“Call centres of super funds and other financial services organisations are often trained and qualified to provide basic general advice to assist and educate customers,” said Csaba Baranyai, chief executive at IFS.
“But now, because these organisations hold personal information about the customers to whom they’re speaking, suddenly those conversations are captured as personal financial advice. This would likely have significant impact on how these organisations have to think about and structure their service models.”
Many in the industry are supportive of the move to advice outcomes that will benefit the end consumer.
“We think focusing on the advice outcome for the consumer is a good thing,” said Adrian Gervasoni, IFS’s executive manager – advice solutions.
“Where there is an interaction between a professional and a consumer, something good needs to come out that for the consumer, whereas at the moment, all the focus and effort go into auditing the advice process to ensure it is compliant, which in itself doesn’t guarantee a consumer gets advice that puts them in a better position.”
The proposed reforms have generated significant discussion within the industry around issues such as changes to the ‘best interests duty’ test to an obligation to provide ‘good advice’.
“The personal advice proposal in its current form is regressive,” said IFS’s Baranyai.
“It reverses the direction of decades of industry development and undermines the professionalisation of financial planning and creation of trust for consumers.”
The Levy review also proposes to give trustees discretion over how to charge for advice, which has been criticised given the industry’s history of charging fees for little or no service.
“Another issue is the proposal to allow collective charging of advice through superannuation funds and giving a lot of discretion to trustees to decide exactly what they should be charging for that advice,” said Xavier O’Halloran, director at consumer group Super Consumers Australia.
“This industry has had a history of charging for advice and not delivering very good value and we don’t want to see a return to that problem.”