Last week, ifa reported that Treasury intends to make comprehensive income products for retirement (CIPRs) available to super members regardless of whether or not they’ve sought financial advice.
“That means we need to look at what the definition of intra-fund advice is going forward to accommodate that,” he said.
In comments made to ifa, Lifespan chief executive Eugene Ardino said this approach is inappropriate for CIPRs due to their complex nature.
“With all due respect to Treasury, I think the notion of deregulation of who can advise on a complex product such as a CIPR is not in the public interest and in fact would be detrimental to the retiree,” he said.
“Anyone can invest in a product without advice, whether or not it is regulated. The only thing you can regulate is who can advise on certain products and who cannot. So, what Treasury seems to be suggesting is that it be possible for anyone to advise on these investment products, including the person trying to sell it.”
Further, Mr Ardino agreed with suggestions made by Rice Warner in June that CIPRs should be considered a financial product and fall under the AFSL scheme, adding that the current proposal leaves clients vulnerable.
“If you go with this suggestion then you would have the sales team of a super fund trying to sell these products to retirees and I’m sure I don’t need to explain the problems with this model. If you want to structure CIPRs so that clients won’t need advice then structure them so that they are simple, which is difficult as they are complex instruments,” he said.
“You will not stop clients from receiving advice on CIPRs anymore than you can force clients to seek advice on financial products. All you can do is decide who can and cannot provide that advice and there is just no good reason to say that anyone can advise on CIPRs.”
It’s easy when no-one at treasury is going to get sued for stuffing up the design or implementation of these things. When it all goes pear-shaped I’m sure that Union Super, Labor, CHOICE, Fairfax journos & Four Corners will still find a way to make out that its all the fault of financial planners….
Just like last nights look at insurance on the 7.30 Report. Despite most issues being with Group Insurance within Union Super FUnds, they still managed to book-end the segment with a slag on AMP, despite the fact that the worst TPD definitions are held within Union Super Funds. There was a little bit on SunSUper’s shitty cover and then straight back to AMP.
They currently let funds “sell” account based pensions… What’s the difference?
An ABP might look like a simpler product through an investment lens, but that’s because all the risk rests with the retiree.
IMHO it’s more important to get advice before taking a pure ABP than a CIPR, before allowing the member to take on all the risk.
Don’t forget that a CIPR is 80% ABP anyway, just with some longevity protection added on. Why do people find that so heinously complicated?
social security planning? cashflow planning? taxation planning? estate planning? Financial Planning 101
I can see your point about there not necessarily being more complication in a CIPR than an ABP, but the ABP at least has very little lock-in, so long as the underlying investment is liquid which most are.
I don’t know that a retiree would be able to easily change their CIPR if they decide it wasn’t what they wanted, five years down the track, without incurring some significant penalties along the way.
With ABPs 100% asset tested and deemed income it’s also less complicated to understand the interaction with social security entitlements, but this will depend on what the actual rules applied to CIPR are.
Why the treasury is offering a half baked solution without carefully thinking through the advice factor?
Is this an instruction from the ex- Goldman Sachs executive led government of the day?
Can’t wait for Treasury to road test the basic education and guidance of these highly complex financial products to retirees with little financial knowledge.
Seems like a perfectly sensible approach Treasury.
WTF is our government thinking ?