The conversation that is being pushed by the FSC and unfortunately supported by some advice representative bodies, is that we should all be focused on affordable advice. ‘Advice should be available for all Australians’ is a catch-cry that makes a headline but is unrealistic and arguably unattainable.
Firstly all Australians do not want advice. We see the disengagement in superannuation funds and while we can bang on about advice, a large part of the community simply need education. Part of this could be done by advisers but financial literacy should start in schools and be supported through all subsequent education. There is a case that every course offered by a college or Tafe should include some form of life skills training especially given the failure rate in small business and high consumer debt.
Debatably, the FSC is pushing the affordable advice argument to persuade the regulator and government that their phone based sales teams can offer ‘scaled advice’ and make it far more ‘affordable’.
– No need for that expensive education and messy advice regulatory system
– Let’s avoid that ‘best interest’ stuff that means we have to understand the client and meet their needs
– The last thing we would want is to offer a product that we don’t own
– FASEA shouldn’t apply to the FSC version of scaled advice, otherwise it would fail at every standard so let’s not include that
The rhetoric is that this scaled phone based advice will be in the best interests of the client as long as the starting assumption is that the client should stay in the current product and use that products default options. Coincidently, this will be the best commercial result for the product owner, but their motivations are altruistic?
Recently some of their members have broken ranks and started talking about offering their members property advice and even gearing (all under scaled advice) but the cynical observer might argue this is more an ambit play. By throwing up these red herrings they hope the advice community will forget their real objective is to get away with calling product sales scaled advice.
Professor Hanrahan argued we should be focused on ‘Quality advice’. If you want well educated, ethical advisers to sit opposite a client and provide good quality advice that considers the clients’ best interests and provides defendable documented advice, then there is a cost.
Not all clients can afford legal or medical advice, so the government provides this. The lawyers and doctors that work for the government are still lawyers and doctors and are still subject to the same codes and laws but the government, not the pharmaceutical companies, fund this.
For advice, this may be more about education, but providing a loophole for product providers to offer sales dressed up as advice will mean another royal commission in ten years’ time with exactly the same result.
I see the regulator is now talking about ‘simple’ vs ‘complex’ advice and low and behold the product manufacturers are all for it.
Our professional bodies and licensees need to push back on this and call it out for what it is. Simple advice is not advice – it is product information or sales. If the regulator wants to carve out sales for the FSC, by all means, but leave the word ‘advice’ well and truly out of it.
Only qualified financial advisers, subject to best interest structures, provide advice. Leave the sales to the phone based sales teams, but it isn’t advice.
Paul Forbes, chief executive, Australian Advice Network
Very good article Paul. True advice, as opposed to product sales, may well not be accessible by many Australians and we just need to acknowledge that and move forward.
Great article,
All research shows that the majority of low net worth Australians want only single directional answers to questions eg” Am I on Track” or “am I better to carry out action A v action B? eg pay off home loan v contribute more to super. There is unlikely to be any product mention at all. Cash flow modelling allows simple non conflicted answers after consideration of individuals finances and needs, and is affordable.
Great article Paul, hit the nail on the head.
Good article. It seems that “advice affordability” is being used as an excuse for product floggers to get regulatory carve outs. There is an easy way to make professional financial advice more affordable, without substituting in the sort of product sales pitches masquerading as advice that union funds and “roboadvisers” are currently being allowed to get away with.
Just fix the regulatory mess and ASIC persecution that takes up so much of the time and resources of professional advisers and adds significantly to their costs. Professional advice will never be affordable for everyone, and nor should it be. But it could be much cheaper and more widely accessible than it is now, if the regulatory mess was fixed and regulators were more even handed.
Good comments Paul
Totally agree
Well stated, Paul. Would also add that it’s not just the FSC but also the union industry funds that want this carve out clearly defined and protected to preserve their vertically conflicted models.
This seems to indicate that a choice has to be made affordable or quality. What is the matter with having affordable and quality advice.
Great article and well articulated.