In a report released yesterday by the Association of Superannuation Funds of Australia (ASFA) Research and Resource Centre, the industry body said regulatory intervention was required to ensure consumers are educated about the dangers of longevity risk.
“The scaled advice operating guidelines being developed by ASIC should be drafted in such a way as to allow funds to provide all members with advice relating to retirement products,” the report states.
“Increased take-up of longevity products will occur when fund members are better advised and educated about such products.”
However, financial adviser Jason Bragger of Brisbane-based firm Dolfinwise told ifa scaled advice is not sufficient to recommend retirement products.
“These products should never be purchased without a careful and comprehensive consideration of a person’s full circumstances,” Mr Bragger said. “Implications of purchasing the wrong retirement products can have devastating effects.
“To consider scaled advice should allow recommendations of retirement products by call centre operators is to make a mockery of the whole advice framework.”
Rather than extending the scope of scaled advice, the corporate regulator should seek to look at reducing compliance costs for holistic advice on retirement issues, Mr Bragger said.
Similarly, Corporation Superannuation Specialists Alliance (CSSA) president Douglas Latto responded strongly to the ASFA submission, calling into question the suitability of scaled advice in any product recommendation scenario.
“Any product recommendation is personal advice by definition,” Mr Latto told ifa. “I’m not against the concept of bringing the issue more to peoples’ attention … but recommendation of product is very specific and we can’t say how you can do that in scaled advice; you have to take their whole financial position into account.”
The additional guidance on scaled advice around retirement products is the fifth of seven “impediments to deferred annuities” listed in the ASFA report.
Others include a call to permit SMSF trustees to purchase deferred annuities and equivalent products and to put new administrative systems in place for regulators and government agencies to undertake assessments of new post-retirement products on a regular basis.
The report also calls on “product providers” to “take the lead” in educating consumers on longevity risk issues by “modelling a range of returns, volatility and life expectancies” and “focusing on retirement-related risks such as longevity, sequence, timing and inflation”.
Lets allow scaled advice product sellers to sell a longevity product – an annuity – to their current members to lock them in forever and prevent them ever moving to another fund. As once these annutity products are purchased you cannot redeem them or the redemption costs are horrendous. Now there is a product sale without any appropriateness or best interest duty if ever I saw a scheme. How two faced & insulting is this to everybody who has struggled through the FOFA changes to now have this little monstrosity peddled as in the members best interests. The only best interest this is in is in the superfunds, no one else, and definantly not the member.
Really that would be something new, the Industry Funds want to provide all manner of full advice dressed up as scaled advice with zero AFSL compliance, completed by call centre jockeys with zero qualifications.
And then on the other hand they want full FoFA and more over the top compliance, more paper work, more regulation for qualified advisers to provide the same advice.
And there is more, the Industry funds want to bundle the fees for this advice into every members admin fees so no one knows what they are being charged and 90% of members pay a fee for a service they don’t receive.
But wait there’s more, forget best interest as they can only sell 1 product regardless of it being the best product for the client or not.
PPLLEEAASSEE, what planet are these jokers on. Just remember your best mate and ex industry fund employee is no longer running financial services.
Are these guys serious or just pulling our legs for a laugh ???