During the SMSF Association National Conference last week, Michelle Levy, the lead of the Quality of Advice Review (QAR), argued that her final report does not recommend the creation of a two-tiered advice model of relevant and non-relevant providers.
“I don’t think it is two-tier. In the law, you need to draw some stark boundaries because otherwise, it doesn’t work, but I think advice is a continuum,” Ms Levy said.
“What I have said is that there is some advice that is reserved for professional advisers.”
Ms Levy also defended her recommendation that superannuation funds should be allowed to provide financial advice.
She dismissed the notion that her recommendation favoured the funds over advisers and consumers and labelled suggestions that a fund should not provide personal advice to its members as “nonsensical and stupid”.
“It wasn’t my purpose to help superannuation funds themselves or banks, it’s about their customers and their members,” she said.
Ms Levy emphasised that having recognised that the 16,000 or so advisers in the industry could not meet the increasing need for advice, she explored various options with a view to developing a new idea to solve the accessibility crisis.
During her considerations, Ms Levy also contemplated the idea of the government distributing advice, akin to the UK model where individuals over the age of 50 can access government-backed free guidance. She soon, however, learnt “it falls short of meeting people’s needs”.
“It doesn’t actually meet people’s needs. It assists. And I did say in my report that I think the government could be doing more … But it’s not going to resolve the issue,” Ms Levy said.
“If I had recommended that the government set up a free advice body, new department, well it would be less popular with the government than my recommendations are now, I suspect.”
It was then that idea of the institutions being obliged to give their customers sound advice was born.
Speaking particularly about superannuation funds, Ms Levy highlighted that the relationship with one’s superannuation fund could potentially be the longest-lasting relationship in an individual’s life, especially considering that if the fund meets their needs, they may remain with it from the age of 18 until they reach 100.
Ultimately, Ms Levy assessed that the QAR would not bring about significant change for advisers.
“It’s really about getting back to the core of your role,” she said.
She’s probably regretting doing the review, given all the criticism she’s been getting.
Laughing all the way to the Bank(s) and Super Fund(s)
So much of Ms Levy’s report hangs on the super funds giving advice. What happens if super funds don’t get the carve out they expect and find out the good advice is just as hard to prove as best interest duty, and therefore choose not to give advice? Then the whole QAR is a waste of time, if it isn’t already. QAR should have focused on making it easier for high quality, highly qualified and non conflicted advisers to give personal advice. It didn’t and that is why consumer will continue to struggle to access affordable (and quality) advice.
Which just highlights what the QAR’s true purpose was – super fund carve outs.
Last time I tried to call an industry fund I was stuck in the queue forever only for the phone call to be “disconnected”. I remember during Covid some of the industry fund phone lines were so jammed you just got a voice message saying they were not accepting phone calls. Not sure where the super funds are going to find all this extra staff. It has to come from somewhere (maybe backpackers would prefer giving financial advice rather than picking fruit). Maybe a lot of advice will be coming from overseas call centres?
..“non-sensical and stupid” to suggest super funds shouldn’t be able to give members personal advice is provocative! Looks like my 22 year old son who sells health insurance products directly to the public, should consider employment with one of the super funds to give super fund advise without needing to go to university and becoming an authorised representative.
The issue that didn’t seem to come through is that there is a low level of financial literacy in the community and perhaps, more education could be promoted?
The QAR started from the basis that the answer is greater access to advice and, this is needed, but a certain amount of general education could also assist people have a standing start and to have a better ability to analyse what is being said.
Ms Levy states that super funds should be able to give consumers “some but not all advice”. They currently can give “some personal advice” that relates to the super account of the member under the “intrafund advice” carveout. They can currently provide advice as to members asset allocation and investment options. Financial advisers have to go through a whole long process and prepare a SoA to give even simple advice.
If super funds want to provide more than intrafund advice, they can also have qualified and licensed financial advisers – there is nothing to stop them from doing so even now. It is just that super funds do not want to go through the complex process of providing advice like financial advisers have no choice but to do.
She also says that with stronger consumer protections in place and conflicted remuneration eliminated, large institutions are in a better position to give advice. What can be more conflicted remuneration than receiving a salary and bonuses from your employer (the super fund) and being able to recommend only your employer’s super fund in order to “retain” the member’s funds? How does that differ from receiving a trail commission?
Michelle Levy says that super funds are currently providing personal advice under the guise of “general” advice. This has been known for some time but no super fund has been caught out for doing this other than Westpac (because it is easy to bash a bank). If an adviser does this sort of thing, they can go to jail. If a super fund does this, it’s okay, just change the law to allow them to do this legally.
Of course this will create a two tier system. What happens when most “advisers” just join large institutions because this will be the easier path – get a salary and bonuses and not have to find clients. Most advice will then be conflicted and we will have come full circle.
Product providers should just be able to provide product information and very simple one off advice relating to the member’s interest in that super account keeping in mind the sole purpose test. Any advice that considers their home loan etc will breach the “sole purpose test” in any case and taking the fee for this advice from the super fund is not justifiable.
And product providers should provide the client with a big and bold disclaimer to state that their advice is limited and may not be in their best interests.
100%! – This summarises the biggest issue with the QAR perfectly. Are you reading this Ms Levy?
One of the super funds had an 80 financial planner advice division and they shut it down as it was unviable.
A number of other super funds are already outsourcing advice to the non aligned sector.
Michelle needs to get up to date with the market.
Maybe we should suggest that hospitals should start giving advice to patients too….
Do they not already?
No – Dr’s do.
They advise on early super fund release to pay for cosmetic procedures, even advertise it on the radio to get people in!
You mean drug manufacturers recommending directly to the patient – this I believe is essentially Levy is recommending ““It wasn’t my purpose to help superannuation funds (insert Drug manufacturers) themselves or banks, it’s about their customers and their members,” Bypass that expensive Dr I guess – would save a big $$$$$$ from the Medicare budget that way?
“What I have said is that there is some advice that is reserved for professional advisers.”
Ms Levy also defended her recommendation that superannuation funds should be allowed to provide financial advice.
That’s ok then – “some advice” will still be reserved for Professionals.
Unlike the legal profession whereby consumers that cannot afford a Legal Professional, nor do they qualify for legal aid, just have to go without.
I want more people to get financial advice but I want product providers to do it not the 16,000 financial advisers they can’t help… make it fee for service paid when clients use the service everyone get give it must be min RG146 to give basic advice.
Super funds can’t service all these customers either so that argument is dumb