Touching on this issue on the ifa Show podcast, Andrew Gale and Stephen Huppert from the Actuaries Institute’s Help, Guidance and Advice Working Group, explained the rationale behind its HGA framework.
The institute believes the framework can enable “millions of people of all ages to receive support”.
“Middle Australia stands to benefit most because comprehensive personal advice is out of reach for many, but help, guidance and specific purpose simple advice at pivotal moments would significantly improve their financial wellbeing,” said Gale at the time of the framework’s release.
For Gale and Huppert, this is difficult to achieve under the current framework, which provides few distinctions between what kind of advice and support you are allowed to receive through different channels. One of the main issues this generates at an institutional level is confusion around compliance.
“There is still lots of bits and pieces that institutions are doing without it being very clearly defined, and there are many of those institutions [that] worry, are we going to step over the line?” Huppert said.
“Are we encroaching on advice? Are we giving something that’s purely educational? So, we’re calling for a bit of a better framework to allow both providers and consumers to be clearer on what they’re getting and why they’re not getting something else.”
While this creates difficulties and confusion at the institutional level, it can also discourage clients from seeking advice as they may be unsure what kind of service approach is suitable for their needs.
“The guidance framework could really help with both existing and emerging clients — cheaper cost to serve, more efficient, increased capacity,” Gale said.
For Gale and Huppert, the framework offers a way forward for institutions and advisers, clarifying compliance issues and creating strong barriers between the type of assistance they can give clients.
“We really believe it clarifies things for advisers,” Huppert said.
“It sets out really clearly what super funds can do and what they can’t do, and really protects the adviser’s territory by defining these clear boundaries, and as we said earlier, acting as good referral pathways to advisers as the complexity increases.”
Gale added that, in some respects, the lack of clarity around boundaries puts advisers in a “not dissimilar” situation as super trustees.
“The boundaries are blurred at the moment, and part of part of that means that trustees of super funds, in some cases, are being cautious about the services they delivered to members because they don’t want to cross the boundary,” he explained.
“Likewise, advisers would have those concerns, because the reality is, the advisers already do have a lot of financial information about the client, their asset and liability position and their family status, all the rest of it.
“So, in many cases, the discussion … would be presumed to be advice because they’ve got that knowledge. What we’re saying is, if you could actually have clearer guardrails in place in terms of what is a guidance discussion versus an advice discussion that could actually reduce the regulatory burden on advisers in terms of just having a friendly, indicative steering type discussion, without it being as structured and formal as advice.”
In turn, clarifying where the boundaries of different levels of advice are would allow for more discussions that can help more clients.
“It’s why we think greater regulatory certainty on guidance will be great for financial advisers and their interactions,” Gale added.
“It’ll be great for super funds interacting with members. It’d be good for the consumers, because they’d have a much richer array of services being delivered.”
To hear more from Gale and Huppert, tune in here.
