The last 10 years have been difficult for the financial advice industry. In 2016, there were reportedly 26,500 financial advisers. Today there are around 16,000 advisers. The decrease in the number of advisers shows how hard those years have been.
And yet, the average wealth of Australians has increased dramatically during that period. Education and professional standards in the financial advice industry have been significantly enhanced to everyone’s benefit – especially Australian consumers. Many advisers without the new mandated qualifications have left the industry.
There have been extensive changes to benefit consumers following the Hayne royal commission. Consumers can now expect that they will receive quality advice from advisers with solid qualifications who are required to comply with professional standards enshrined in a code of ethics. Compliance with this code of ethics is mandatory for advice to consumers.
However, that is likely to change with what the government apparently proposes.
The government proposes that superannuation funds will be able to provide financial advice. However, what appears proposed by the government is that the people providing the financial advice to consumers via the superannuation funds will not need to meet the same professional qualification requirements and not need to meet the professional standards in the code of ethics.
While the government proposes to maintain and even increase the best interests duty obligations of relevant providers (i.e. your classic financial adviser), it appears that the government sees no need for the new advisers in this new superannuation fund distribution channel to be required to meet even the current best interests duty. The government’s position seems to be that a lower “good advice” duty will apply – with no real definition of what that “good advice” duty would mean.
Australian consumers’ holdings in their superannuation accounts are typically their largest financial assets outside the family home. Advice about superannuation isn’t simple. It’s some of the most complex financial advice required.
It is critical to the financial well-being of Australian consumers that high-quality advice is provided by well-qualified advisers. Those advisers’ conduct should be regulated by the mandatory code of ethics that applies to professional financial advisers. They should have to hold the same qualifications.
Our view is that these hard-won gains in professional standards and professional qualifications should be in place for all consumers in respect of all their financial product holdings. If the government does not require the same high standards for a person to give advice within a superannuation fund, those hard-won gains will be lost.
The people who will be disadvantaged will be the people who have been misled into believing that the high professional standards and ethical code apply to advice within superannuation funds.
An apparent justification being put forward by some supporters of the new proposed regulatory arrangements is that the overall advice process is too costly for consumers and there are not enough professionally qualified advisers. That criticism also has echoes in other professional categories and sectors.
In medicine, for example, there is criticism that the ability to seek treatment from a doctor is becoming too expensive and there are insufficient numbers of doctors. However, the government response has not been to reduce the qualifications and experience benchmarks for doctors to allow non-medical personnel with lower qualification levels or to dilute the professional standards and ethical requirements under which doctors operate and practice. Most people would regard that as an absurd proposition.
It seems that every government initiative since the introduction of the Financial Services Reform regime in 2001 has seen the need to, and sought to, improve adviser qualifications and standards with the ultimate view to protecting consumers. Seen through that lens, the current proposals seem a highly retrograde step.
Fiona Halsey, director at Halsey Legal Services
If the Government genuinely wants to allow greater accessibility to quality financial advice (spoiler alert- they don’t), they could provide means tested tax deductibility for plan fees, and even a nominal amount as a payment (similar to “bulk billing”) for low income families…Unfortunately, this would not suit their actual agenda…
All great points in principle Fiona. However one important technicality as I understand it, is that super funds will not need to comply with Levy’s proposed “good advice” duty. The government is trying to finagle this by claiming super funds already have a duty to act in the best interests of members, so no additional advice related duties are needed for employees of super funds. All they need to do is remove the restrictions on unlicensed advice for super fund employees.
Of course this ignores the fact that union super fund employees have been giving conflicted, inappropriate, unqualified, unlicensed “advice” for many years, in direct contravention of both their super fund duty to act in best interests of members, and financial advice laws.
Jones’ intention is to legalise and expand the conflicted, inappropriate, unqualified, “advice” provided by union super funds.
Commentary such as yours is appropriate, but I’ve never seen a Government listen to anyone that has a view counter to its own…Their larger strategy is to access the pool of money that is “Industry Super” and so they will need an active group of promoters advocating a large allocation to “safe” Government Bonds. Watch for compulsory sector allocation to bonds in the near future…
Tony – sounds like you remember the old “30/20” Rule regarding superannuation funds that existed prior to 1984 – i.e. 30% of the assets in a super fund to be held in Government securities of which 20% was to be held in Commonwealth Government securities. A good way to fund government deficits! Ironically the rule was removed by the Hawke labor government
Why is there no class action to get advisers reimbursement for commissions that were turned off illegally by the government? This has cost myself and others hundreds of thousands of dollars if not millions. As a group it si a huge amount. Fiona please comment??
Turning those off was a rare win from government policy for an industry that actually (at least in part) wants to become a profession.
Service your clients for your money and its not a problem.
Great feedback and certainly true, so worrying for us advisers who have done the hard yards becoming qualified. Thank you Fiona
If super funds are required to act as a fiduciary then wouldn’t fulfilling that obligation mean they stay the hell out of advice thereby avoiding a massive conflict of interest? The same people providing Advice via AMP and the large Banks are now just working at AwareSuper… Obviously when it comes to doing what’s right for Australians money and the power of Union Super funds trumps everything.
A lot of us are silently wishing you would represent us, Fiona.
These comments are spot on. Its so blindingly obvious for those of us still serving that the current Government is seeking to serve the Big Super funds and in particular the Industry Funds. Didn’t the Minister release the news at an Industry fund breakfast? Its hard not to be cynical in the face of such warped and deluded logic. Its a clear case of the Emperor not wearing clothes and this Minister needs to be called to account.
Thanks for your opinion, good to see the legal fraternity sees the issues.
The Govt has decided that the culprits in poor advice resulting from the Royal Commission was not the banks nor the super funds eg AMP, IOOF, etc. But the adviser community as a whole. Therefore to trade off on optional SOA’s advisers will have a increased Best interest Duty, while Super funds can run rampant. Working for ING years ago at their customer service centre, we could and would not give advice to clients. Why? Because the advice is conflicted? It does not take into account whether the client is in the best super fund for their needs.
Thank you Fiona. Don’t stop raising your concerns.
It would appear that the only people advocating for Super Funds to provide advice are Levy, Jones and the Funds themselves. As Keating once said ” follow the money trail to Canberra”