As is now widely known and rather feared, the Quality of Advice Reviewer (QAR), Michelle Levy, has recommended that superannuation funds, banks, and insurers be granted approval for a limited return to advice. And while battle lines appear to have been drawn with superannuation funds and industry groups on one side and independent financial advisers on the other, an industry professional has urged advisers to reconsider their disapproval of Ms Levy’s recommendation.
Speaking on an upcoming episode of the ifa podcast, founder and director of Forte Asset Solutions, Steve Prendeville, said, “What she’s articulated is that it’s algorithmic advice or limited advice, with a very tight parameter as to what that constitutes rather than providing full advice.”
“I actually don’t see them as a competitor,” Mr Prendeville said.
“I actually think that there is a great need for Australians to actually have access to limited advice or algorithmic advice.”
Mr Prendeville noted that while Vanguard, which announced in November that it plans to “reshape” super with its new market offering, is expected to make a “very big splash” within the marketplace, “it’s not a competitor force”.
“We feared robo-advice, but when we have a look at the global experience, it’s more that, and super funds to a great degree as well, they’re more in like an incubator, but when there is a real need for advice, that’s when they come to full financial advice,” Mr Prendeville said.
“I believe it’s a welcome addition, I don’t see it as being overly competitive in nature.”
Last month, new research released by the Financial Services Council (FSC) showed that by implementing QAR proposals, the government would be ensuring an additional 2 million retirees benefit from “high quality and affordable advice” that is fit for purpose.
Commenting on the research, which revealed that QAR would help an additional 2 million retirees spend $22.5 billion more and leave $6 billion less in bequests annually by the year 2040, the CEO of the FSC argued that if advice policy settings are left unchanged, only a third of retirees will get financial advice over the next decade.
“A generation of retiring Australians would benefit from high quality and affordable financial advice that is fit for purpose on the topics they want, when they want it,” CEO Blake Briggs said.
“The review’s proposals would help millions of Australians put in place a plan to spend more of their superannuation with confidence and in a way that improves their financial wellbeing throughout their retirement.”
To hear more from Mr Prendeville, tune into the podcast next Wednesday.
The problem here Mr Prendeville is that you have to be a bit naïve to think “limited” is going to remain what everyone would hope. The banks/super funds will say “oh we are definitely just going to use a computer to help people risk profile and then pick from one of our 5 diversified offerings”…sure, whatever, hardly an issue. But then a few years go by and they will cry woe to the minister “we can’t help our members under this oppressive regime, we need the flexibility to recommend XYZ to truly meet the needs of the Australian public”…
Fast forward another few years and they realise “hey, if we could provide a bit more advice – we could really boost profitability in these products over here.. Oh MR/MS MINISTER! We really can’t serve the public under our limited capabilities – we truly believe this extra little carve out is what we need”
A few years later, 2035 comes around and by then we’ve had a few high profile failures after some very conflicted but rubber stamped arrangements go bad. The public is infuriated at advisers once more. A royal commission or FOFA event occurs, red tape ensues, back to square one, rinse/repeat.
Suffice to say, fool me once vertically integrated large organisations – shame on you. Fool me twice, shame on me.
We have already seen time and time and time again that these mobs will always act in their own self interest to exclusion of all else. We are seeing it right bloody now with these tiny useless industry funds that should have merged with a bigger fund YEARS ago to achieve scale/reduce costs/increase capability – but some hold on till the bitter end.
I don’t trust any of them as far as I can throw them – and you shouldn’t either.
Thankyou Peter for writing the other side of the risk equation.
Advice fit for purpose – but who’s purpose?
Advice delivered via payment from the product – seem to remember something similar – but the product provider didn’t have direct control of the advice delivered and the Financial Planners could recommend an alternative product and the client more likely to have a relationship with the Financial Planner – but now it seems the product provider has more direct control – fit for purpose?
Probably a good reason the product providers want to deliver advice but they don’t seem to want to deliver advice in the best interest of the client – but I could be wrong????
I don’t think the issue/concern is one of competition, it is more about the flow-on impacts of taking us back 10 years and unwinding a lot of the hard yards Advisers have endured.
Well, I guess that’s one way to look at it!
Steve, can you point to the bit where it says banks and super funds can provide advice within a “very tight parameter”. She doesn’t she is leaving this up to the banks and super funds where they draw the line.
Also the FSC report stating that an additional 2 million retirees will benefit from “high quality and affordable advice and fit for purpose” is laughable. There is no guarantee the advice will be high quality not fit for purpose. Just like the junk insurance they were caught peddling or the money they were taking while not delivering anything, they are in the business of selling things for money, not making sure their clients are better off.
Wonder if the FSC would like to make their data public, rather than just make baseless claims.
The absolute critical part here are the words “very tight parameter”. As we have all seen and witnessed first hand from the coal face over the last 20 plus years, words and theory are one thing to a Bank or a Super Fund, but applied in practice are a movable spectrum and set of rubbery goal posts, that normally correlate to CEO’s and senior Executives bonuses.
It’s not the advisers that should fear the banks returning to the advice space its the consumers who should.
“a welcome addition” – well that’s a interesting choice of words, considering what has played out post RC and the remediation process that has still not been finalised.
One thing’s for sure about the QAR, the adviser submissions and voices have meant absolutely zero, as per previous rounds of legislative change. If you want to work as a Professional Financial Adviser in Australia, it means accepting the fact that we will never have any true advocacy and as such the Industry will remain severely compromised, due to the enormous conflicted and powerful product providers.
Said no one ever!
So basically we are going back to where we started. The reality is that you cannot provide advice in a client’s best interest if you don’t have an open APSL. Sure, allow product issuers to sell their products but this is not financial advice.
The problem is not the Robo Sales Advice.
The problem is Real Advisers strangled to death by the Government Gordian Knot of mass over regulation.
No way should Robo Sales Advice be given lower regulation than Real Advice.
50% to 75% reduction of useless red tape costs and regulation across the board both for Real Advisers and Robo Sales.
Then let the people decide what service they want.
Dreaming of a level Advice playing field.
The Federal Government wants funding from the Industry funds to support its affordable housing policy. The limited advice space is part of the handshake deal between the industry groups and the Fed to make it happen.
Let’s not get ahead of ourselves with these Liberal Party leftovers and see what Labor Minister Jones actually decides. lol
No one ever thinks about the risk side. If the banks are back in risk, with minimal advice and Robo advice, they will be flogging rubbish products. Advisers will come across those products and correctly recommend their replacement. That introduces mindless compliance. We just do not need the banks back into financial advice muddying up the water, then running off again leaving carp to kill off the Murray cod because remaining advisers will have to pay an ever increasing ASIC levy to fund the remuneration action by the regulator.
Sure, let’s also legislate for nurses to provide limited medical GP advice where it’s needed. Just because the power brokers can, doesn’t mean that they should. It’s not the accessibility that is the problem here, but rather the hypocrisy of reducing advice requirements and in turn reducing Professionalism. Why wasn’t this addressed during the Hayne RC???