Speaking on an ifa webcast about the government’s response to the Quality of Advice Review (QAR), the chief executive officer of the Financial Advice Association Australia (FAAA), Sarah Abood, said Financial Services Minister Stephen Jones is allowing superannuation funds to expand their role in financial advice as a “trial run” to essentially test the waters.
“When we listen to the minister, when we hear the way those recommendations are being promoted and talked about, it’s very much that this [is] allowing people who are not financial advisers to give advice to people that that would be a big change and I think in the minister’s head, he is thinking let’s do a trial run with the super funds,” Ms Abood said.
“Let’s see how it works in super funds and if we iron any kinks out of it, we can, with more confidence, extend it more broadly.”
More recently, she said talk has shifted to whether life insurers “might be the next cab off the rank”.
“In both cases, it’s because there is an existing duty at law to preference the interests of clients or members.
“For insurers, it’s the duty of upmost good faith, for trustees, it’s prioritise the interests of members.”
Ms Abood did agree with the QAR lead, Michelle Levy, that when there is a duty to both prioritise the interests of members as a whole and the individual to whom information is being provided, “you can find problems”.
“There are funds that are providing advice under the current laws now and they’re able to do so where they are providing comprehensive advice, they’re charging for it and they’re doing so under the current regime,” the CEO said.
“The issues that our members have are more around who exactly is going to be giving this advice, is it going to be a digital tool, is it going to be a human being and what knowledge do they have to enable them to do that irrespective of whether the duty is the best interests of the member or good advice for the member? Either way, it can’t just drag a backpacker from the street and put them in a call centre. You need to be using people that have knowledge that won’t blow the client up.”
Ms Levy has argued that the government’s decision to sideline her good advice duty is problematic because under the current regulatory regime, funds face a conflict between two obligations.
Namely, Ms Levy assessed that a fund trustee’s obligations under the SIS Act [Superannuation Industry (Supervision) Act 1993], to exercise its powers in the best financial interests of members and to promote their financial interests as a whole, conflict with the duty to act in the best interests of an individual member receiving advice.
According to the QAR lead, it is impossible to ask the trustee to reconcile these duties.
QAR recommends banks, insurers, and funds provide advice
The government has so far said it intends to consult further on Ms Levy’s recommendation to allow banks and insurers into advice.
However, speaking at the House standing committee on economics on Wednesday, NAB CEO Ross McEwan said NAB has “no plans” to “go back into that market”.
“We’re out of that space,” Mr McEwan said.
“It would have to be quite a change in legislation to twist my arm to go back into it.”
He did, however, recognise the need for more advice to be made available to Australians.
“I think that Australians do need to get advice particularly as they get closer to retirement, but that’s not a service that we’re in a position to provide.”
To hear more from Ms Abood and Ms Levy, tune in to our webcast here.
This must be April Fools Day. The life insurance companies completely ignore the ‘Utmost Good Faith’ requirement and they pay little attention, if any, to the Life Insurance Code of Practice. It would be a disaster for consumers to have Life insurance company staff masquerading as fake financial advisers flogging product. It’s almost like the Royal Commission didn’t even happen.
To paraphrase one of Labor’s greatest leaders; “Well may the government save the super funds because NOTHING will save the life insurers!” Methinks even Gough would turn in his grave if he could witness what has happened to our once-great profession.
The super funds are going to be just fine as the govt gives them every chance to bring advise in-house and build fences around ‘their’ clients. No pesky independent advisers to worry about. The INSURERS, on the other hand are in a completely different boat. A client ‘buys’ products voluntarily from an insurer and there’s been a LOT LESS of that going on lately. Think about the obscene premium increases along with the heavy watering down of policy contractual definitions.
People simply have stopped renewing policies and buying new ones in general. This will only be exacerbated as inflation takes hold further and specialist risk advisers (who write most of the new busn) are slaughtered out of the industry by the lovely politicians posing for their sound bites about how they are protecting people from those scam artist advisers. Think of that ‘Hayne’ disaster a few years back.
Yep, super funds will survive and thrive, count on it. Life insurers, sadly through their own idiocy, will wither and die in Australia. Their ONLY hope is to cut premiums by over 50% tomorrow and bring back decent policies advisers are confident to use with clients (IP, trauma, TPD). Unfortunately we all know the likelihood of that happening . . . the statutory funds better be in good shape APRA, they’re going to need them for more than just paying claims very soon. . .
There’s an old saying about how businesses fail… very gradually at first, then very suddenly.
Unfortunately I think that may be the path disability insurance is now on. Insurers and APRA are deluding themselves that there are no serious problems because lapse rates are low. But lapse rates are low because there are no decent replacement products anymore, and clients are clinging on to their expensive policies by cutting back on benefit options and sums insured. That is just a temporary reprieve. There’s not much left to trim, and clients can’t hold on much longer. Lapse rates are about to shoot up.
Wait for all the AFCA complaints for the new series of income protection policies too, not to mention eroding the publics’ confidence in income protection as a reliable option to protect their incomes. Clients will be denied claims, kicked off claims after two years, low payout ratios… Good luck AFCA.
Will the call centre fake advisers do a degree and ethics exam?
I come across direct sale-insured clients periodically. Almost always, they are paying too much, compared to the cover I could have put in place for them, even paying our firm servicing commission. Go figure. Robotic Sales = More profit for these big companies, not lower premiums for consumers.
Ever see a St George “Quick Cover” by Westpac, now with TAL. Pre-existing exclusions 24 months before policy start date, 180 day exclusions upon any Reinstatement, decreasing cover on hidden formula.
ASIC chose to ignore crap bank policies! Howard de-fanged the ACCC
These animals, endorsed by “donations” to professional bodies, will run RIOT if let loose advising customers direct. Mr Jones – you are NUTS !
History repeats itself. It sounds like a radio station – “All the hits of the ’80s, 90s and the noughties”. Let’s be clear. Access to advice is a red herring. This is about the Labor government’s owners, the Industry Superfunds, retaining members’ funds post-retirement, saving a life insurance industry which has effectively been responsible for it’s own extinction and further marginalising professional advice to only high-net worth clients. Let’s open the flood gates on product sales masked as advice again and see where it takes us. Here we go round the mulberry bush .. again. Surely the banks don’t want to put their customers through this again?
How can an insurer give advice on their own product – really sounds like it would meet the best interest duty
How can a super fund?
Yep. Letting product providers to provide advice to clients about their own products without any duty to act in the best interests of those clients is a great idea. It worked out so well last time. Corporations law states that the interests of share holders come first but surely the representatives at these companies will put the public before corporate profits. They must have leared from all the trouble they got into from the Royal Commission and the 6% one daily increase in share price which accompanied the release of the RC report.