Restrict institutional advice to internal products: AIOFP

Speaking on the latest episode of the ifa podcast, Peter Johnston, the executive director of the AIOFP, said that one of the foremost topics surrounding the Quality of Advice Review reforms is the ability for people within organisations such as super funds, banks, and life insurers to provide information to clients.

Mr Johnston noted that there is little chance the way this is provided is through someone called a “qualified adviser” – as he pointed out, that notion is “a dead duck, there’s no doubt there, and deservedly so” – the situation that the AIOFP would be happy with is institutions being able to provide information on their internal products.

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“We don’t like the idea of the qualified adviser situation,” he said.

“We think what all these organisations should be able to do, the banks, the insurance companies, etc, super funds, what they should be allowed to do is have trained internal staff, who just give information about their own internal product.

“Us advisers don’t want to do that. So, we just think they should be permitted to do it after training course, which is done internally. Then if they get people ringing up their members of their super fund or policyholders, etc, these people can talk about that particular policy or that particular fund or that particular account balance.

“Independent advisers don’t really want to do that.”

Additionally, Mr Johnston argued that these providers wouldn’t need to attain any level of qualification at all, just a training program as “all they’re doing is giving information about their product”.

“If these people want to then go on to become a financial adviser, they start studying and then gradually get into it because we need more advisers out there over the next 30 years,” he said.

“So we think they should consider doing that and then most super funds are going down the path of using external independent advisers, which is where they refer the work on. This is for advice outside of their superannuation account balance.”

He offered the example of a super fund member who has just inherited some money and requires advice as the type of work the super funds are looking at outsourcing.

“For them to have internal financial advisers, which are looking at $200,000 plus with compliance put on wages, APRA is having a very close look at that because there’s just reserves being spent on these teams of financial advisers, which they don’t really have to pay for in-house,” Mr Johnston added.

“They’re far better to outsource that independent work to the independent advisers. Then they have a trained internal staff to give the day-to-day information on Centrelink and also the circumstances of their product.

“We think that makes sense. We don’t think we should get rid of the best interest duty. We think that should stay because we’re all meant to be doing the best thing by the client … So, they’re the two major things we’d like to see fixed.”

To hear more from Peter Johnston, tune in here.