The chief executive officer of moneyGPS and accountantsGPS, George Haramis, believes the government’s “active encouragement” of superannuation funds to deliver advice has placed them in “a very interesting situation”.
In June, Financial Services Minister Stephen Jones revealed the government’s response to the QAR final report, categorising it into three distinct streams. While stream one relates to more pressing issues directly impacting advisers, such as the suggested replacement of statements of advice, stream two is all about allowing super funds to expand their provision of advice.
However, ifa has since learnt that funds don’t have consensus on the government’s QAR response.
Namely, speaking to ifa last month, the CEO of the Financial Advice Association Australia (FAAA), Sarah Abood, revealed that she had encountered a number of fund representatives at QAR-related roundtables hosted by Treasury and was surprised to learn that funds lack alignment on stream two.
“I won’t name them, but there were a number of funds, some of them were industry funds that were saying, ‘No, we don’t think that that should happen. We don’t think that non-relevant [providers] should be providing advice from super funds’,” she said.
“I don’t know what this is going to mean in terms of the QAR regulations.”
Mr Haramis is of the opinion that funds are being placed under a lot of pressure to meet the government’s expectations.
“I actually feel for those guys, because having run a number of AFSLs, having turned around a couple that were in trouble, having run my own boutique AFSL, I know what it’s like from both sides of the fence,” Mr Haramis said on a recent ifa podcast.
“I think the government’s approach in actively encouraging super funds to deliver advice is a big ask, a very big ask.
“They were set up to manage people’s savings for retirement and now they’ve been asked to deliver advice.”
Mr Haramis pointed out that for funds to embrace the idea, they need to be certain that it won’t put their businesses in harm’s way.
“Delivering advice is all about risk mitigation and you need to be of a certain size to deliver an appropriate advice offering. There are various ways to do that but you have to do it in a very considered way. You don’t want to rush this,” he said.
Moreover, Mr Haramis believes that stream two struggles to hold up without the QAR’s good advice duty, which the government has decided to exclude for now.
“Adopting the good advice principal would have made it a lot easier to deliver personal advice. From the recommendations made by Michelle Levy it just would have been fit for purpose for many people who can’t afford traditional advice or their circumstances don’t need a traditional advice approach,” Mr Haramis said.
“So, they need advice for a particular issue at a particular point in time. Good advice would have been the perfect solution, unfortunately it hasn’t been adopted as yet and I hope to see the government review that decision in the future.”
To hear more from Mr Haramis, click here.
Certain Advice in reality needs to be sold. It’s time-consuming to “educate”. The investment selection of 4 default options is a little bit of risk and you could “provide factual information only” …but hey… when you start adding things on the risk increases. Consider Annuities, new income streams the Government will want to utilize. A lot of education, time etc….add on Insurance.. Much easier to sit back and just enjoy the gravy train of charging fees on SGC money. CBA did this dance years ago, where they got into Advice, then outsourced and set up Financial Wisdom, realized it was loss-making and tried to get out.
This article confuses stream 3 with stream 2. It’s important to know the differences between the two streams and understand that at this stage there’s no timeframe or commitment from the Government for stream 3 to be implemented. I think most funds are aligned on stream 2.
If Labor want super funds to provide advice they should just legislate new rules that would allow them to build distribution networks. Salaried advisers from AustSuper, MLC, CFS, AMP. Open shopfront and let customers decide which shop they want to go to. Then wait a few years for another Hayne and start the process all over again.
Make AMP great again – or is the aim to regulate everyone out except Union Super?
laughing so hard fell out of my chair.