There is broad consensus in industry and Canberra about the opportunity to bridge the advice gap and provide accessible and affordable financial guidance to millions of Australians who need it. But getting it wrong would erode consumer trust, undermine professional standards and allow some sections of the industry to gain an unfair advantage at the expense of others and consumers.
Recent proposals stemming from Michelle Levy’s Quality of Advice Review have ignited a fierce debate within the advice profession. At the heart of the controversy is the concept of creating a new class of adviser (NCA) who, under the proposed model, would provide personal advice without the rigorous qualifications and standards that currently safeguard the profession – qualifications this publisher campaigned for.
Even more concerning is the suggestion this new class – currently dubbed, ridiculously, “qualified adviser” – could be funded through a “collective fee” levied on all members of superannuation funds, regardless of whether they access these services.
The profession must scrutinise these proposals and advocate for solutions that truly serve the best interests of consumers while preserving the integrity of the profession. That is why Investment Magazine’s sister publication Professional Planner has argued that closed-door discussions held under non-disclosure agreements are inappropriate.
There’s no denying that many Australians struggle to access affordable financial advice. Regulatory reforms and increasing compliance costs have inadvertently widened the advice gap, leaving a significant portion of the population without the guidance they need to make informed financial decisions.
However, the solution cannot be to lower the bar for professional advice or to reintroduce funding models that echo the discredited practices of the past. Collective charging for NCAs not only undermines the user-pays principle but also risks resurrecting the very issues of “fee for no service” and conflicted remuneration that the Hayne royal commission sought to eliminate. This is an issue close to my heart as I was made a Member of the Order of Australia in part due to my contributions for publicly and privately campaigning for the royal commission.
Collective charging: A wolf in sheep’s clothing
The proposal to fund NCAs through a collective fee charged to all superannuation fund members is deeply flawed. It mirrors the notorious “fee for no service” scandals, where consumers were unwittingly charged for advice they never received. This practice eroded trust in the financial advice profession and led to significant regulatory crackdowns.
Imposing a blanket fee on all members – including the estimated 1.3 million consumers who already pay for professional advice – would subsidise the cost of NCAs. This is blatant cross-subsidisation that violates the fundamental principle of fairness. Why should members who may never use these services bear the financial burden? Moreover, this approach could erode members’ retirement savings, without delivering commensurate benefits.
Before the Future of Financial Advice reforms, trail commissions allowed advisers to receive ongoing payments from product providers, creating inherent conflicts of interest. These were rightly abolished to protect consumers. Funding NCAs through collective fees is, in essence, “commission by another name”.
This model would enable super funds to collect fees indiscriminately from all members, regardless of whether they receive advice. It reintroduces the very conflicts that tarnished the profession’s reputation and could undo years of progress in building consumer trust.
Financial advisers have invested significantly in elevating professional standards through rigorous education and ethical obligations. Allowing NCAs – who may lack comparable qualifications – to provide personal advice dilutes these standards. It creates a two-tier system where consumers may receive advice of varying quality, potentially leading to poor financial outcomes.
If NCAs are funded collectively and prohibited from charging direct fees or earning commissions (on insurance products), privately owned financial advice firms operating on a user-pays model are placed at a competitive disadvantage. This could marginalise highly qualified professionals who prioritise their clients’ best interests, ultimately harming consumers who benefit from their expertise.
Without clear distinctions between NCAs and fully qualified financial advisers, consumers may not understand the limitations of the advice they receive. They might assume they are getting comprehensive, personalised advice when, in fact, they are receiving general guidance without the depth of analysis that complex financial decisions often require.
This misrepresentation could lead consumers to make ill-informed decisions about their financial futures, undermining the very purpose of seeking advice. Transparency about the qualifications of advisers and the nature of the advice provided is essential to protect consumers and maintain trust in the financial advice profession.
The irony of industry super funds’ position
It’s particularly ironic that industry super funds – which have historically campaigned against commissions and conflicted remuneration – are now advocating for a model that embodies these very issues. Their previous “compare the pair” campaigns highlighted the negative impact of hidden fees on retirement savings. Yet, by supporting collective charging for NCAs, they are promoting a system that imposes undisclosed costs on all members, regardless of whether they benefit from the services.
This shift suggests a strategic move to consolidate control over financial advice within their own vertically integrated structures, potentially at the expense of independently owned financial advice practices and, ultimately, consumers.
Industry super funds have played an outsized role in helping Australians save for retirement. The rise of the profit-to-member funds sector has been to the benefit of the nation, and it can rightly be proud that it came out of the royal commission less tarnished than retail funds and other corners of the finance industry.
However, they must not be allowed to leverage their enormous power to gain an unfair advantage, especially if it comes at the expense of consumer protections and professional standards.
The push for collective charging appears to be a strategic move by some funds to dominate the advice space. By funding NCAs through member fees, they can offer services that independent firms cannot compete with financially, given their commitment to higher standards and compliance costs.
This could lead to a de facto monopoly on advice services by large institutions, reducing competition and potentially leading to lower-quality advice for consumers.
A call for transparency and fairness
The profession must advocate for a model that upholds transparency, fairness, and consumer choice. Allowing NCAs to charge direct fees or earn commissions – with appropriate safeguards – ensures that those who receive advice are the ones who pay for it. This user-pays principle aligns with the values of fairness and accountability that the profession stands for.
NCAs should be clearly distinguished from professional financial advisers. They should not be permitted to provide personal recommendations or professional opinions. They should be required to meet an education standard and their role should be limited to providing factual information and general guidance, empowering consumers without overstepping professional boundaries.
This model aligns with the regulatory intent to simplify financial services laws while providing meaningful assistance to consumers and could readily be achieved by definitional and other straightforward modifications to the existing general advice model.
We urges the government to engage properly and publicly with advice professionals to develop solutions that truly benefit consumers without compromising the integrity of the profession. That is why Professional Planner is hosting the Advice Policy Summit on 10-11 February 2025 in Canberra to help drive policy outcomes to benefit the advice profession and protect consumer outcomes.
Furthermore, The future of the profession and the financial well-being of millions of Australians are at stake. We must not allow short-sighted proposals to undermine decades of progress in building a trusted, professional financial advice industry.
Colin Tate AM is founder and managing director of Conexus Financial, publisher of Investment Magazine.
