Financial Services Minister Stephen Jones believes it’s absolutely crucial to ensure the 5 million Australians approaching or at retirement have access to advice. He emphasised that without such access, Australia could potentially face a “crisis”, a situation he is determined to prevent at any cost.
As such, Mr Jones is absolutely intent on expanding access to advice via superannuation funds, which he told ifa is something the funds are “overwhelmingly” supportive of.
Draft legislation extending the advisory powers of superannuation funds is expected to see the light of day by the end of the year, and while it is expected to closely align with the recommendations outlined in the Quality of Advice Review (QAR), it will also incorporate findings from other research sources.
According to Mr Jones, and somewhat contrary to what ifa has heard from stakeholders, funds are “embracing” the opportunity to engage on the advice front.
“Will every fund do exactly the same thing, no, of course they won’t, they don’t now, but I’m pretty confident that funds will have to respond to the demands of their members. If you’re sitting in a fund with thousands of members approaching retirement, and they’re asking you questions, you’re going to have to respond to that and that’s what these reforms are all about,” he told ifa on Friday.
Mr Jones has been very vocal in supporting the expansion of funds’ advisory services as he sees the advice gap as being most prominent among the cohort approaching or in retirement. He explained that advisers simply lack the capacity to meet the demands of such a large number of Australians.
This stance has garnered its fair share of critics who accuse the minister of not grasping the nuances of the advice industry. The common argument here is that relying solely on funds won’t be enough to fill the advice gap, given their limited expertise.
Responding to this, Mr Jones told ifa that he is “dealing with the biggest part of the biggest problem”, and that’s the 5 million people who, in his view, need financial advice “right now”.
“I am very open to the fact that that’s not the end of it. So, we will be looking for solutions for everybody else as well,” he said, referring mostly to younger Australians.
“It’s not like there isn’t advice out there for those [younger] people. There is no shortage of mortgage brokers in relation to credit, there is no shortage of insurance brokers in relation to insurance, but I am alert to the fact that there are other cohorts that we need to find solutions for.
“You ask anyone whether they want to get access to advice and they’ll say yes, you ask the same group of people how much they’re willing to pay for it, regularly they’ll say ‘well, nothing’. So, it’s not just about the advice, it’s about the business models … which I’m really focused on.”
While Mr Jones did assure that he intends to look at ways to ensure more younger Australians can access advice, it seems he is not inclined to involve banks and insurers in this, despite the QAR’s push.
Namely, the QAR doesn’t differentiate between super funds, banks, and insurers, and instead suggests that all institutions should be given expanded advisory powers in order to plug the advice gap. But Mr Jones disagrees.
“There’s no doubt if you’re able to crack it in super funds we can create some models which might be applicable. But I’ve also been pretty pragmatic and I said to the life insurers, and to the banks, ‘Tell me what you want to do, that you can’t do’. Let’s try to solve real problems without having to go to the effort of setting up major regulatory overhauls, let’s look at what you want to do that you think you can’t.”
Draft legislation on ‘quick wins’ within weeks
The government’s response to the QAR, delivered mid-year, was made up of three streams, with the first stream focused entirely on removing red tape for advisers. The second deals with the advisory powers of super funds, while the third groups all the recommendations Mr Jones has reservations about.
Draft legislation on the first stream, or the “red tape removal agenda”, is likely to be made public by the end of October, the minister said on Friday.
“We should have some legislation in Parliament in the first quarter of next year,” the minister told a room full of advisers at a joint event organised by the Financial Advice Association Australia (FAAA) and the Financial Services Council (FSC), and attended by ifa.
Asked by advisers why it’s been such a lengthy wait, Mr Jones said his parliamentary remit extends beyond advice.
“I deal with one-third of the legislation that goes through Parliament,” he said.
Previously, it had been expected that the minister’s red tape removal agenda would hit Parliament by the end of the year.
Last one out, please turn off the lights.
Super funds have already commenced the take-over of advice. Many of us have been approached to jump ship and the super funds are dangling nice juicy carrots, including, hassle-free advice to their clients without the need to be bound and gagged by red-tape.
Is anybody else just shaking their head at all of this?
Yes – for the past 10 years. You couldn’t make it up. It could all be fixed in an afternoon.
…if you were QANTAS, you could get the regulators to do somersaults, wintersaults and/or a front walkover, all in the name of “good government”
This is becoming the joke I thought it would. Super Funds are keen to give advice — I would too if I didn’t have to follow any of the compliance requirements. Banks already have an extensive remit — then let them loose in super, they are just as conflicted through their vertical integration as super funds are.
Red Tape Removal Agenda — We’ll get to that eventually. Will probably be a few years after we do something about the red tape removal that we promised when LIF was implemented.
One key element of the proposed “red tape removal agenda” should be the complete removal of the Annual Fee Renewal Consent Form bureaucracy that doesn’t exist in any other jurisdiction on earth. Until this annual requirement is removed, advisers cannot operate cost effectively to take on busy working families that can only afford low cost service support. Or maybe that’s the real agenda in their refusal to remove it. ie Providing advice to 5 million unsupported Australians is just all talk.