On the latest episode of the ifa Show, experienced financial services executive Tony Beaven explained why Australia should not introduce the new class of advisers, and instead follow the UK’s example for delivering limited advice.
While the Council of Australian Life Insurers (CALI) suggested that the new class of advisers should only be required to hold an AQF4 level qualification, Beaven argued that advisers working in financial institutions should still be fully qualified professionals, despite the calls for lower education requirements from some in the wider industry.
“In the UK, limited advice is limited advice. It’s there, available, and not a problem from that side. And I think we almost become complex in Australia. We’re overcomplicating this in a sense, because when you look at limited advice, the qualifications, just to confirm this, you’ve still got to have your level four diploma in financial planning, the new diploma in the UK. It doesn’t matter whether you give limited advice or not,” Beaven said.
“So you shouldn’t change the benchmark and qualifications for somebody that’s going to give risk advice, specific superannuation advice. They still have got to have that base level of qualification and that, please God, shouldn’t change.
Having held a number of senior roles in the financial advice sector across Australia and the UK, Beaven believes there is no issue with having advisers working in institutions, as they do in the UK, as long as the necessary steps are taken to inform clients of the restrictions of their service.
“They put on their business card that I’m a restricted adviser of ABC and they also put this in their statement of advice and they make sure the client is aware of this. Then if you’re independent, you can put independent from that side and then the client is fully aware of this,” he said.
“So the disclosure and the disclaimers, when you’re then doing the advice you put in a statement of advice, ‘I’m specifically looking at superannuation today. These are the relevant disclaimers that I haven’t gone into’.
“It’s going to be quite interesting where they’re going with this. I think somebody said it in one of the professional bodies – why don’t we just follow the UK’s example and save a lot of hassle? You could just tick the box and implement it tomorrow.”
‘Qualified adviser’ in the UK?
He explained that the UK has looked at ways to solve the advice gap as it struggles with the rising cost of service, however, when attempts were made to introduce a less qualified class of advisers, it was unsuccessful.
“The [Financial Conduct Authority] have looked at that. This is where the flow overs come in. So the FCA has started mooting some proposals of, everybody’s got to look at this because it’s only going to get worse, as obviously, advice fees will need to go up because it’s a constant piece where if there’s legislation, more regulation, more administration, then the advice fees will go up and it will increase the advice gap from that side of it,” Beaven said.
“It’s something that’s happening with consumer duty now in the UK, is they’re starting to see the advice cap come in and it was mooted by the FCA in the UK saying there should be some sort of perhaps slightly lower qualification in the UK from that side.
“And I think at the moment it’s been quashed, well and truly.”
Beaven said introducing a new class of advisers with lower qualification requirements goes against the efforts made in recent years to increase the professionalism of advice.
“Now what you’re almost doing, in a sense, is saying, ‘Thanks guys, but what we’ll do now, to do this, we’ll do a slightly lower qualification’. That isn’t going to help with the professionalism of the industry,” he said.
Finally, Beaven said advisers in financial institutions should still be fully qualified and required to clearly state the limitations of their services.
“My thoughts are, look at the advice process. Start looking at ways that you can build this through the limited advice process. Leave the qualifications as they are, but then have the disclosures, the restricted environment, the IFA environment, so then the companies that want to go down that route, as they are in the UK … SJP in the UK is, in a sense, a restricted advice company,” he said.
“They’ll put those relevant disclosures on the business cards, the statements in advice and on their website as well. So why make things difficult when you could build the same model and all of a sudden you’ve got limited advice with the relevant disclosures and disclaimers, etc? You still maintain the quality of the advisers because they still have a minimum benchmark to adhere to.”
This is nuts and would not address the problem which is a lack of advice for straightforward financial queries.
Why would a degree qualified adviser agree to work in a call centre providing limited advice to ordinarily mums and dads with simple needs, when they can obtain greater satisfaction and definitely greater pay providing comprehensive financial advice to their choice of client. Time to think big the current approach is not working.
In response to Intentional, Labor did not create the problem. It was created by the other lot in the original legislation that also created all the problems that finally surfaced in the Royal Commission. Fortunately, much has since changed, but the glaring error of defining information as advice in legislation will perpetuate distortions as long as that definition continues to exist in S766B. Labor does have an opportunity to fix it, let’s see if they understand (or are interested in understanding) that issue. I do agree with Intentional on one point. The other lot who introduced the legislation in 2001 were well and truly under the influence of large financial institutions. Labor is influenced by a different set of large financial institutions.
The term “Qualified Adviser” was probably made up as a joke in a late night Canberra bar when someone pointed out the two meanings of “qualified” which are almost diametrically opposed. When something does not qualify to be described as an unqualified success, it can be described as a qualified success. That twist of meaning must have raised a chuckle from bureaucrats who proposed it for legislation. They probably held their breaths waiting for someone to pick up the joke.
The terminology problem comes from S766B that defines information about a financial product as financial product advice. By this definition a drug company giving information about the medical benefits of its product is providing medical advice. The medical profession would be demanding change to the legislation.
QAR’s approach to dealing with the clumsy term General Advice to describe what is essentially product inforamtaion was to remove the term General and just call it Advice. It follows that anyone who provides what is defined by 766B as advice is to be described as an Adviser. Treasury is well aware of this issue but dismissed changes to current and apply another dysfunctional layer.
It seems that the Brits had a similar problem and dealt with it by describing “advisers” whose “advice” was limited as Restricted Advisers. That terminology does not deal with the basic issue of current legislation that defines product information as advice, but it is way better than the Qualified Adviser joke proposed by bureaucrats. Yet another bandaid solution proposed for financial services, rather than dealing with the source of the problem.
This will no doubt have been included in the formal feedback and consultation. I know because I personally outlined it, however – The Government has suppressed all responses and feedback from the Bill and to this day not published the Professions suggestions. I can tell you why, because they ignored every logical step and title to aid Australians receiving objective unaligned personal advice and instead want to line Industry Funds and vicariously their own and their parties pockets. LABOR MUST GO
Stephen Jones reads this and then runs off to his mates @ The Industry funds who tell him no way Jose!
it would be worth Mr Jones Looking at FG17/8 https://www.fca.org.uk/publication/finalised-guidance/fg-17-08.pdf
It may give him some guidance and clarity on what can be done
or he could just ask the professional bodies
That won’t happen as he will only care about what the Industry fund lobbyists tell him to do…
Can’t agree with this unfortunately. The distinction between independent and ‘tied’ was never really resolved in Australia. The UK does not have a degree requirement for new advisers and while there are great challenges with this is Australia, going backwards now would be a catastrophe and fuel for those who are anti-advice. I see little choice but to operate a two-tier system but PLEASE don’t call the lesser adviser as Qualified!
totally understand where he is coming from having worked in the UK, limited advice specific to one product area with detailed explanations/warnings to the client that you are only giving advice in this area. its been working for many years in the UK
It worked here as well – just ASIC Treasury/ASIC??? didn’t like Retail doing it – only Industry Super is allowed to do this in Australia?
Mr Beavan, please define limited advice. No grey areas, no blurry bits. You can’t. End of story.
In the UK the difference is they’re employer by who the adviser recommends – restricted. They’re not employed by flogging organisations product – IFA.
He’s not suggesting segregation on scale, but employer relationships as in the UK