ifa previously learnt that Treasury has been hosting roundtables on each of the three streams that make up the government’s response to the Quality of Advice Review (QAR).
Participating in some of the roundtables was the Financial Advice Association Australia (FAAA), as well as other relevant stakeholders including the Joint Associations Working Group, the Association of Independently Owned Financial Professionals (AIOFP), representatives of superannuation funds, and others.
Speaking to ifa on Thursday, FAAA chief executive Sarah Abood revealed that the superannuation funds taking part in the roundtables don’t have consensus on the government’s QAR response.
“What was most surprising to me was that in stream two, super funds themselves were not aligned on what they thought [of] stream two … And that surprised me, because I guess I thought they would be pretty happy with the idea that they could employ people who weren’t fully qualified to talk to their members about super,” Ms Abood said.
In June, Financial Services Minister Stephen Jones revealed the government’s response to the QAR final report, categorising it into three distinct streams. While stream one related to more pressing issues directly impacting advisers, such as the suggested replacement of statements of advice, stream two was all about allowing super funds to expand their provision of advice.
And while many in the industry had believed that the funds would rejoice at the government’s announcement, according to Ms Abood, what has emerged is the opposite.
“I won’t name them, but there were a number of funds, some of them were industry funds that were saying, ‘No, we don’t think that that should happen. We don’t think that non-relevant [providers] should be providing advice from super funds’,” she said.
“There were certainly differences on the best interests duty, on the good advice framework, and so on. They’re definitely not advocating as a block, they are not all saying the same thing.”
Ms Abood added that what this could mean moving forward is still unclear.
“I don’t know what this is going to mean in terms of the QAR regulations,” she said.
“There have been several roundtables held on stream two, we didn’t attend all of them. I certainly think it is going to be an interesting challenge for the government in terms of how they will respond, how they’ll deal with that very diverse feedback.”
Stream two not well understood
But past the initial element of surprise, Ms Abood explained that stream two actually involves a range of intricate matters, including the details of the proposed duty to provide good advice.
“There’s a lot to unpack in stream two. I think it’s probably not as well understood, but it would actually involve the changes that are otherwise in stream three being kind of tested in super funds in a way. And they are quite complex,” Ms Abood said.
The third stream of the government’s QAR response encompasses the eight recommendations that the government intends to examine more closely, which notably incorporates the proposed good advice duty.
According to the FAAA CEO, the creation of a new duty, such as the good advice duty, would have implications across a range of acts and regulations. Moreover, she explained that some funds still struggle to grasp its definition.
“The idea of the good advice duty potentially being the objective test is one that is being talked about as part of stream three. But for the super funds, it’s a little different because that’s the test that advice of the non-relevant providers would be held to.
“So, there’s a bit of ‘What is it? How are we going to define good advice?’ … So, there’s been conversation on that, but I think it’s deeper than that. There are some super funds, as I said, that don’t want to have non-relevant providers giving advice, and don’t want the good advice duty. There are other super funds that do, but they are aligned with our position in some cases where we’re saying there should be minimum education requirements, and there should be a definition of what we mean by simple when we’re talking about simple advice.
“Others believe that there shouldn’t be a legislated minimum requirement, that trustees should have that duty, so there’s definitely not a singular position.”
Following Mr Jones’ delivery of the government’s QAR response to an audience of super fund CEOs in June, a number of funds, including Australian Retirement Trust (ART) and AustralianSuper, said the reforms would ensure more Australians access to advice.
“These reforms will empower members to have greater choice in relation to how they access financial advice, whether that be through their super fund, digital channels or external financial advisers,” said ART chief executive officer Bernard Reilly at the time.
The government is expected to unveil its final QAR response by the end of the year.
This actually makes sense. ‘Advice’ from unqualified people who are employed by a product provider is a recipe for occasional disaster and it takes only one super fund who invests like a cowboy and recommends that product to all and sundry to tar all super funds.
It makes sense that the smarter super funds don’t want to be tarred with that brush as the benefit for them to be able to give advice is marginal as they are making large losses at the moment.
The Industry Super Funds are only interested in one thing. Retaining as many super fund members as possible in Pension mode. This week’s announcement about “default” pensions members automatically receive after age 67 tells you where this is going. Either way the Bank Super Funds are going to get done over (again) lol
Yes, these unqualified QAR individuals will probably be based in the Philippines or India, just like Qantas & Telstra have. On reflection, the big decision for fund members going forward will be: Do you want to have access to SMSF or Personal Choice Platform where you can get through to your adviser (like you do with a reliable family GP), or do you want to end up on the intrafund fee charging Industry Fund Super Hotline for hours at a time, and wait over 6 months to have anything serious done? (just to save a few dollars & get less Aged Pension in the process?)
i dont think what fund your in really matters unless your going to actually construct a proper investment portfolio using direct shares and sector / asset specific managed funds … thats not on the table for the average punter so i dont think any of these proposals will do any harm … we need to stop showing our bias or we can hardly point the finger at the industry funds for doing the same… i have advised for over 20 years and to be honest I think super as a whole is ridiculous.. get rid of it.. like Scott Morrison said give it to Australians to use on getting a roof over their heads .. not keep the unions wealthy.. it will be interesting how politics plays out over the next 20 years but I can tell you there is volcano thats slowly getting to the point it will erupt and that will be it – see you later Super !!! you cannot keep the masses renting for ever
Mr and Mrs client: Hi Super fund. We need advice
Super fund: Hello Mr and Mrs client, no worries. The fee is $5500 and our advice is to use the super fund that I get paid to sell.
Mr and Mrs client: What do we get for the $5500?
Super fund: Advice, to use the only product we have
The insanity of this is just breathtaking
On the contrary, the super funds will do it “for free” and members will be bombarded with TV ads “compare the pair”. Good luck convincing a member to pay even $1 for advice, never mind $5,500.
Where’s Best Interest Duty (I know this is changing). Would they ever tell a member to go to an alterate fund, NO. So if the alternate fund is in the clients best interest what do they do and how are they treated by the regulator on that?
I have to admit did not see this coming. Gonna think this one over the weekend.
Easy to understand. Those super funds that already have a significant adviser presence want to keep their competitive advantage over those that don’t.
Meanwhile another publication is reporting an interview with Albo, in which he said there will be no action on QAR until at least next year. So much for Stephen Jones’ election promise about quick action on obvious issues. He’ll probably still be making the same fraudulent promise by the time of the next election.
It looks like Albo & Jones strategy is to drag out the QAR proposed legislation until 6 months out from the next election, and then waive the trade-off carrot to the advice community in exchange for the ISF’s carve out. Given the history of advice legislation, when has the Govt. ever acted in the best interest of the advice industry?
Looks like its better to free up actual qualified advisers to allow them to provide simple advice verbally (and file noted) for a nominal fee paid from their product.
Do I have enough super? That’ll be $10.95. Next, please.
Speaking to several super fund members, it appears they will not be wanting to pay super funds for any additional advice (ggod or not). They claim they would expect the advice to be given without any additional charge as they already pay super fund administration and related fees and expect this to be part of the super funds service.
Besides, people are unwilling to pay more than $500 for advice even if they were to overcome their lack of trust in advisers (Retirement Income Review, July 2020, page 449, survey result)
So all that “community expectations” around conflicted renumerations is now out the window – allowing Product Providers to pay for and control the delivery of product advice is all Ok again?
Seems to me the very minute a Trustee of a Superannuation Fund outsources any advice to another entity, at that point it will look and feel very similar to the AMP of old? Potentially, Trustees will be only paying when advice is delivered – which I believe was the basic concept for up front commissions?
Time to get a chair and pop corn?