FAAA pushes for ‘specific encouragement’ to seek professional advice from QAR

In a submission to the Senate economics committee inquiry into improving consumer experiences, choice, and outcomes in Australia’s retirement system, the Financial Advice Association Australia (FAAA) said that while there is a place for super funds to assist members, external advice needs to be prioritised.

“The proposals put forward in the government’s response to the Quality of Advice Review, have the potential to make a meaningful difference in increasing access to financial advice, however the details are yet to be finalised,” the submission said.

“We envisage that super funds could provide more factual information, general advice and even personal advice, however given the importance of this advice, we would like to see specific encouragement provided for people to seek external professional advice that is not tied to a single product solution.

“The government proposals, with respect to more advice being provided by super funds, opens up the issue of bias and conflicts of interest, which will need to be carefully managed.”

The FAAA also noted that there has been an “insufficient focus” on the importance of improved financial knowledge to enable super members to manage an increasing level of wealth in retirement.

“We think this is important to change,” FAAA chief executive Sarah Abood said in the submission.

“The FAAA supports policy change to better enable optimal outcomes for more Australians entering and throughout retirement. We believe that improved financial knowledge combined with financial advice is critical to achieve this.

“Financial knowledge and advice will have the greatest impact, although we believe that technology innovation also has an important role to play over time. In our view, financial advice is at the core of assisting Australians to make good financial decisions in preparation for and throughout retirement.”

It also used the submission to reiterate its stance on a number of retirement-related issues, most notably its push for a $2,000 means tested payment to pre-retirees to help pay for financial advice.

The FAAA first raised the idea in response to the government’s consultation on the retirement phase of superannuation.

“Given that lifting the level of financial knowledge in the Australian population is a long-term process, we recommend as an interim measure, perhaps for a decade, an offer to Australians of a special payment to allow them to seek financial advice,” the FAAA said.

“This could be something in the order of $2,000, potentially subject to means testing, and only available to those beyond a threshold age (possibly 55 or 58).”

Both submissions also made it clear that while the FAAA is in support of “nudges”, it is firmly against default actions.

“The government has suggested that their intent, as part of their response to the Quality of Advice Review, is to better enable ‘nudges’ to encourage people to take action. We support this approach, provided that it is done in a way that is balanced and encourages people to consider independent personal advice relevant to their situation, financial objectives and aims,” the FAAA said.

“We note that ‘nudges’ that encourage a member to consider options that may benefit them are very different to ‘defaults’ that take action on behalf of a member who has not made an active decision. We do not support defaults in retirement planning, as there is a high risk of permanent loss that cannot be recouped.”

Additionally, the FAAA said it does not support “government intervention into the financial product space where this is likely to come at a significant cost to taxpayers and without any guarantee of voluntary take-up by consumers”.