With advisers now managing fewer clients, according to Investment Trends’ 2024 Adviser Business Model Report, the firm’s head of research, Dr Irene Guiamatsia, argued that there should be a spectrum of advisers to give consumers access to advice at every level.
“I would argue that there’s advice and then there’s advice,” Guiamatsia said.
“We think that we’re actually going to have a space where you have a whole wide spectrum of help, support, guidance, nudge and perhaps ultimately, advice.”
She explained that the current “binary mode, where you have no advice at all or fully comprehensive advice” has not served Australian consumers well, but that she believes that the introduction of a new class of adviser through the Delivering Better Financial Outcomes (DBFO) reforms could be the solution to bridge the advice gap.
“I have great hope, at quite a personal level, that when the Quality of Advice Review legislation passes through, then we actually start seeing that gap, if you will, between the two extremes being filled out with alternative options,” Guiamatsia said.
“I think it is important for advice practices to make money. You know, they are businesses after all, but it is also important to bridge the massive gap in advice to consumers that we have.
“So, I think the solution is actually what we are already sort of marching towards, and so the challenge, I guess, for the industry, is to do that well.”
Guiamatsia explained that, in this model, professional advisers should continue to provide service to those that need and can afford fully comprehensive advice, but that they should also “have other types of advisers, or other types of help, that will very effectively also service clients along that journey and help them retire well”.
While she recognised that consumers have fallen foul of mistreatment from financial institutions providing advice in the past, she believes that “at this very moment, we are in the best position that we have ever been to actually allow service providers, I believe, to actually nudge customers along the way”.
Guiamatsia explained that the changes the advice profession has been through since the royal commission, the strengthening of consumer protections, the best interest duty and fiduciary obligations, has prepared it for the reintroduction of financial institutions to advice.
She added: “I think that’s a great place to be to really get those good consumer outcomes.”
Furthermore, Guiamatsia argued that given the amount of information financial institutions have access to, they are well positioned to offer lower-level advice to their clients.
“So if you think about all the nudges that we’re talking about in relation to super funds, right? Super funds, your bank, have a lot of information on you that they can actually leverage to understand the type of help that may be beneficial to you, and I don’t know why they couldn’t actually volunteer that help to you,” she said.
“You know, ‘This is your situation. You look like someone who may need this kind of solution. Here’s some of the ideas that you could maybe take on board and consider’.
“I think consumers would appreciate being offered those better choices based on information that financial services providers collect every day on them. I think there’s a gradation of various options that hopefully financial services providers will be empowered to offer to their customers.”
“Dr Irene Guiamatsia, argued that there should be a spectrum of advisers to give consumers access to advice at every level”
Wow a Dr of something telling us what to do…
There already is a spectrum of financial advice available to Australian consumers. Consumers can access advice from qualified professional licensed advisers (who will recommend whatever is in the client’s best interest), unlicensed accountants (who will recommend SMSFs regardless of client situation), unlicensed union super sales reps (who will recommend union super regardless of client situation), real estate agents (who will recommend investment properties regardless of client situation), and finfluencers (who will recommend whatever provides them with most advertising/commission revenue).
At the moment, only licensed advisers and real estate agents are legal advice providers. (Financial advice from real estate agents is legal due to property being an exempt financial product). But illegal advice by accountants and union super sales reps is totally ignored by regulators. Most finfluencers are also ignored, with only token regulatory action taken against the most egregious.
The outcome of DBFO will be to legalise the illegal advice already being provided by union super sales reps. That’s it. There will be no change to the overall advice lansdcape already available to consumers. And there will certainly be no fix to the regulatory mess that makes professional licensed advice, which is the only advice focused on the client’s best interest, more complex and expensive than it needs to be.
So in short the legislation/regulations have caused the problem of all or nothing. So maybe the solution could be to fix the legislation/regulations then the current advisers could provide service to a wider range of clients, no need to bring in a lower class of unqualified and conflicted advisers from super funds. I’m not even an industry expert and I worked this one out.