Speaking at an Industry Super Australia webinar, Mr Jones declared “the advice sector is in turmoil”.
“The old business model is stuffed. The new business model hasn’t been created,” he said.
But while acknowledging the urgent need for some serious adjustments, Mr Jones dismissed vertical integration as an answer.
Asked whether accessibility and affordability in advice could be solved by allowing super funds to provide free advice to members by keeping advisers on as salaried employees, Mr Jones dismissed the idea.
“I’m intensely uncomfortable, I’m not going to rule it out, but I’m intensely uncomfortable with the model that has been suggested,” Mr Jones said.
“The royal commission shows that all of the conflicts that exist were vertically integrated organisations where the adviser is attached to the fund, therefore the incentive of value capture is immense.”
Speaking alongside Mr Jones, superannuation minister Jane Hume said the Coalition government intends to keep the advice sector a “highly independent profession”.
“It’s taken them a long time to bring them here, let’s not lose it now,” she said.
Ms Hume did, however, acknowledge further “significant reforms”, praising past changes for transforming the sector from a “sales industry” to a profession.
“That’s been a very uncomfortable journey for an awful lot of those that are within the industry, but it’s been an [important] one.
“I think now there is great opportunity to see far better alignment between superannuation and the advice sector, but the advice sector still has a few ways to go,” Ms Hume said.
Last week, Mr Jones assured advisers, the Labor party would ease education requirements by removing the need for advisers with 10 years of experience and an “unblemished record” to complete a university degree to practise.
His words are considered a major shift in Labor’s policy, as the party distances itself from its greatest opponent, the Liberal Party, ahead of next year’s vote.
Isn’t Jones from the same party whose Shadow Minister at the time (Chris Bowen) said they would implement all of Hayne’s recommendations before reading the report?
So much contradiction. The government has already mandated that intrafund financial advice receives certain carve-outs. They’re able to recommend their pension product to members without the due diligence and comparisons required of advisers who are not employed by super funds and can do it for “free”. Vertical integration is already well and truly entrenched. It’s time to seperate advice and product. Any advice should only be provided by “independent” financial advisers who have no incentive to favour one fund over another. This will ensure money flows to the better funds over time and market forces will ensure that all funds up their game.
He must come clean as to how much his party is receiving from the Industry Funds and the ACTU.
Political donations are the most blatant form of vertical integration.
Potential solution(s) / not liked I bet / so many will oppose / I can hear the outrage now
(1) no fees or commissions can be paid from a Super / Pension / Investment / Insurance products.
All fees for advice must be a flat dollar fee for service (no commissions & no % based fees)
All fees for advice to be paid from credit card or bank account only
(2) no AFSLs issued / approved to product manufacturer(s) / any business with inhouse products
(3) only options to be Licensed are
– Licensee / Dealer Group who are not owned by a product manufacturer / do not have inhouse products
– Self Licensed
(4) more resources & funds invested by Government to support Self Licensed Adviser (i.e. AFSL application support / AFSL Ongoing obligations support)
(5) No product manufacturer can sponsor an event, sponsor a Membership organisation (e.g. FPA), donate funds to anything
(6) Ongoing Advice agreements to be renewed every 12 months similar to current requirements
(7) All Super / Pension / Investment products subject to a standard performance benchmark relevant to their market exposure
(8) All Super / Pension / Investment products subject to a maximum MER, ICR, performance fee, other fee level (i.e. a fund can not charge what they like, they can charge up to a maximum set limit)
(9) All Super / Pension / Investment products subject to repaying all fees to investors if the standard performance benchmark is not achieved
(10) All Super / Pension / Investment products subject to maximum admin fees.
The aim is to make all Adviser not aligned to a product manufacturer, charge a fee for service that is clear and not product related, and make all Super / Pension / Investment products accountable and performance driven for members
What does “ ripe for change” mean Stephen Jones.??
This industry has had more changes in the last decade than Liberace’s change of costumes!
It has been the relentless pace of change and the relentless pressure of relentless over regulation that has destroyed the fabric of advice for the general Australian public.
Please explain what you mean by this ridiculous throw away line.
It’s just political campaign speak with no substance and no plan.
Ask Jones if Labor is voted in he pledges to reverse the LIF mess and promise to reinstate an 80% upfront, 20% renewal commission basis with a sliding scale 1 year responsibility period.
In addition, implement a rule that in the event an insurance policy is replaced within 3 years of implementation , only renewal commission of 20% is paid.
Jones MUST have Labor PROMISE this outcome if they are ever going to convince any financial adviser who is a risk specialist to vote for them in the next election.
Based on Jones’ previous throwaway line regarding Life Insurance commissions, it is highly unlikely that he would be able to tear himself away from his comrade roots and embrace a free market economy where the market determines price.
If not, watch the price of insurance skyrocket even further and the placement of new business dry up to nothing more than a drip.
I like the idea of only renewal comms being paid if policy replaced within 3 years.
I also believe that any clawbacks should be bourne by the adviser recommending the replacement & not the adviser who may have written the policy in the first place.
Not sure how anyone associated with financial services could vote Liberal at the coming election. Even in this article Hume shares their secret agenda of getting super funds to provide more and more advice.
Beware a politician that says throw away lines but then doesn’t have any substance to back it up. The party that will get my vote will say something along the lines of:
1. Hayne was wrong, advice needs to be completely separate from product and it isn’t too hard to do.
2. We will put in place a system so that all advisers are individually licensed through the single body regulator.
3. We will do away with the ROA/SOA farce, as we finally recognise that they aren’t that useful and is responsible for the bulk of the costs. Instead, we will allow advisers to provide ‘scripts’ just as doctors do.
4. Product manufacturers (whether Industry super, IOOF, AMP, or any others) can not directly employ advisers.
5. Advisers can charge FUM, flat fee, and take commissions from insurance, but cannot take anything from recommending to other professionals.
“The royal commission shows that all of the conflicts that exist were vertically integrated organisations”. Yet none of the executives from these organisations got in any trouble and were not fined or given jail time.
So…..To make the financial advice a “highly independent profession” they propose to end commissions on risk, increase the compliance and back office work load and essentially drive all advisers to become employed by the big end of town with an approved product list which only includes products of their employers.
Everything that both sides of the political spectrum plan to do and have done drives advice back to vertical integration. Im pretty sure was their plan all along was to remove competition for the ISA network (Labor) and remove competition for the banks (Liberal). That competition came from independent advisers who will soon cease to exist (other than for HNW clients)
lets go back to the future…yay !!
“Asked whether accessibility and affordability in advice could be solved by allowing super funds to provide free advice to members by keeping advisers on as salaried employees”
The agenda finally revealed.
Anyone who thinks that is a good idea is corrupt to the core. So corrupted, they don’t recognise their own bias.
How is a super fund providing advice different from an adviser aligned with a product manufacturer?
It’s different because they want it to be different.
There is no difference in practice, but I think you’ll find the Corporations Act allows this Intra Fund advice model to exist untouched and unscathed.
That’s why no Govt has ever had the courage to shut this down.
It is absolutely reprehensible.
Fully agree, but all those advisers that are aligned to AFSL that have their own investment products would no doubt believe they aren’t conflicted in any way.
Both should be banned from giving advice.
Beware of the Trojan Horse from Mr. Jones and his Labor colleagues… say they will ease education, and then take away commission… No Thanks
I know what’ll fix it, a whole stack of new legislation. That always solves the problem
As we become a profession, let’s make things easier for both advisers and consumers.
* Allow consumers to pay for financial advice using their super (ANY super fund)
* Tax deductibility of upfront advice fees
* Kill AFSLs, encourage self licensing
* Kill the SOA (or drastically reduce the length and nature of compulsory content)
* Measures to reduce PI costs
Kinda agree but its not that simple
* Allow consumers to pay for financial advice using their super (ANY super fund) – open to fee gouging
* Tax deductibility of upfront advice fees – only for super but how do you split the advice fee when you are doing proper holistic advice?
* Kill AFSLs, encourage self licensing – Lord save us, the majority of advisers have neither the funds or the expertise to run their own AFSL
* Kill the SOA (or drastically reduce the length and nature of compulsory content) – Can’t agree, And anyway the new software take away most of the hassles
* Measures to reduce PI costs – insurance is insurance and always too expensive until you need it
All super funds should be compelled to
allow advisers to deduct their fee from super funds and all should be subject to the same maximums per member per year. This will eliminate the conflicts of interest that exist under the current arrangement where some funds allow the fee deduction and some don’t.
I fear you are primarily looking at this through the lens of the adviser and making it easier to charge people. Come from the other direction and make it much easier for advisers to provide unconflicted advice and then leave it up to the market how these fees are charged.
dreamer