On the latest episode of The ifa Show, managing director of WT Financial Group Keith Cullen argued that financial institutions should be able to give customers basic advice without the need to introduce a new class of adviser.
“We’ve made various submissions over the last 12 months or more to both the QAR and also to Treasury and the minister’s office in response to the QAR on this particular matter,” Cullen said.
“And what I’d say to you is there is an absolute need for product manufacturers, product providers, the super funds, insurers, et cetera, to be able to talk to their members, to their policyholders about simple financial advice needs without being concerned that they’re going to fall afoul of providing personal advice other than with qualified advisers.”
In 2016, the Australian Securities and Investments Commission (ASIC) alleged that Westpac and BT Funds Management had breached the best interests duty and violated its AFSL conditions by providing personal advice to its customers.
When the case was brought before the Federal Court in 2019, it ruled in favour of Westpac and BT Funds Management, finding that they had provided general advice, not personal advice, to customers.
Later that year, ASIC successfully appealed the ruling, with the Federal Court finding that Westpac and BT Funds Management had provided personal advice to 14 of its customers.
Referring to this case, Cullen explained that financial institutions are now unable to offer assistance to customers in need, fearing legal ramifications similar to the Westpac case.
“One of the retail super funds told us last year, I forget the exact numbers, but it was more than 10,000 members that they had out of their cohort of nearly a million members who were in their seventies, they knew had not been contributing for a long period of time, were still in accumulation phase, and had not nominated to go into pension phase, and they were too scared to ring them,” he said.
“You can trace it back to the Westpac ASIC case around general advice and it’s made everybody paranoid. Now, that’s a ridiculous scenario for us to be in, and that’s not helpful for consumers or product providers or the profession more generally. So, we’ve always been very supportive of a mechanism to allow product manufacturers to be able to talk directly to people.”
Cullen argued that instead of introducing a new class of advisers to work in institutions, the government should have amended the legal definitions for general and personal advice.
“One of the key submissions we made is, we thought Levy’s proposal around non-relevant providers and good advice and all the rest of it was interesting, but completely unnecessary. The simpler fix would have been to go back and amend the law around general advice to negate that flawed Westpac decision,” he said.
“We argued that the simplest way to fix it was to redefine general advice as being about what you wanted to say or what the consumer wanted to know, rather than it being about what you knew about the consumer.
“We thought that would have been a simple fix and a much quicker and easier way to get to Levy’s outcome of broadening the availability of advice.”
He added: “But here we are. Tranche two is coming. It’s going to introduce a ‘qualified adviser’.”
Keith, are you really saying we should TRUST the life insurers to give limited advice to those clients that WE placed with those life insurers. Those clients are only policy Owners with that insurer because WE recommended that insurer as the solution to the clients problems.
I don’t trust today’s version of life insurers to be honest in their dealings with OUR CLIENTS. Here is a scenario to consider: Lets say I have a client with an 18-month-old policy and he’s just been whacked with the first increase of around 40% of his IP premium. He’s got a head of steam up and he can’t find my number.
Instead he rings the insurer direct and complains about the $2500 plus monthly premium for him at age 57. His premiums are now very much under attack from our friends the life insurers, who need to replace the income they lost when LIF convinced most advisers not to write risk any more.
The backpackers in the call centre has got a proposition for him. They have this indemnity contract, in the correct Apra approved post 2021 model Template, same benefit parameters and benefits, but it’s around 40% less in premium terms. The backpackers offer that contract to him with the added benefit of no underwriting.
But the policy being offered to our unsuspecting client contains significant added SEVERITY that is not discussed with the client in conversations with the backpacker in the call centre. Pre-existing condition rules will apply should he ever lapse the policy inadvertently when his credit card is scammed, a fate which occurs to most of us at least once a year these days.He wont know about those rules, and would not understand if informed by the insurer.The policy wording also gives the insurer maximum control over the return to work test.
Don’t be naïve, please Kieth. All of the banks had these products 10 years ago when they were sold over-the-counter by bank tellers. St George Bank for instance had a Westpac policy along those lines. Those policies are still sometimes in force and the book of former Westpac policies was recently purchased by TAL. But I haven’t heard any indication from TAL that they might choose to contact those clients to offer product that actually has a chance of paying a claim
Oh and then there’s the first kick in the kahuna’s: if that policy is still in It’s responsibility Period, the originating adviser is going to cop a LAPSE. And you can almost guarantee that the backpacker will be coached to make certain that he badmouths the adviser. Seen it all before, a little bit of rape and pillage never hurt a shareholder.
Bah humbug Keith. I don’t trust life insurers as far as I can throw them, and that’s not far, given my arthritis
Oh and by the way don’t forget the Government’s part in this little business. These backpackers will not be licensed to provide personal advice and therefore they will not be on the FAR and consequently they will not be required to pay the ASIC Adviser Levy , the CSLR Dixon levy or even observe the requirements the FASEA Code of Practice
Thanks very much
It seems that the same people who chronically complain about “unaffordable” advice are now opposing an idea that would provide affordable advice… go figure. There are several reasons why advice is unaffordable, but they are not all equally contributory. The elephant in the room that no one talks about is easily 80% of the reason: the banning of commissions. There was a time when nobody ever complained about advice being unaffordable. Then commissions were banned, and unaffordability became the common narrative.
Considering that issue is settled, and there is no political or intellectual will to even discuss bringing commissions back, we are now left with the other contributors to unaffordability. Absolutely top of that list, long before you talk about overregulation, is the ability of institutions to answer and discuss simple questions with their millions of members. None of these people are walking into adviser offices anyway, so it’s not like the advice community is going to lose out suddenly.
Most people have simple questions and need simple guidance, and the product provider is often best placed to help with that answer. We are here because of activist judges and a QAR report that wants to hardwire that activism into law and make everything “personal.” Why? Why can’t people have common sense, adult-like discussions with their full agency intact and receive information, options, and guidance about relatively simple affairs? Why is that such a threat to the virtue signalers hell-bent on “protecting” everyone?
I agree they shouldn’t be called “qualified advisers”; that’s just a sneaky non-profit sector ploy to further undermine real advisers. In fact, they already have a name, it’s called “Customer Service Rep.” What we need is to clear up the law that the judges have blurred and simply allow consenting adults to have simple and helpful discussions.
I worked in the AustralianSuper call centre to kill time between advising jobs (gap was due to moving interstate) and it was meant to be for a few months. As an experienced adviser I quit on day 2. I was appalled at the outright ADVICE the untrained, unskilled, inexperienced call centre operators were offering the poor people calling up. ALL institutions are in it for themselves, this is in their DNA, no matter what they say, or even what they think they will do, the entire eco-system is built on self-interest and promotion and bonus. I know, I spent 20 years in many of these places before getting out. I thought I was doing good the whole time, only when I left did I see just how biased I was without even knowing it. DO NOT let these players advise clients.
Seems very unlikely ASIC or any Government department would ever investigate and find any issues with Industry Super? Why is that? Do we need a Trump?
Am I missing something ?
Again it’s the red tape and rules.
The need for SoA’s in any number of scenarios needs to be abolished. (By way of one example).
The current adviser numbers might be able to advise 4 times as many people as they do now.
The current framework is twilight zone stuff imo.
This would be the logical and sensible answers, wouldn’t it. Advisers should be able to service a lot more people without the restriction of the current framework. New advisers would be attracted to the industry too. Instead we have limited capacity and high costs to serve, plus a whole other cohort of unqualified people providing conflicted and biased “advice”.
Wake up Keith, these were crocodile tears.
The super fund executive would have been scared about the cost of employing someone to ring them all, and if they did call, these people might be prompted to actually do something about it, including rolling out of the fund or withdrawing the cash (which many of them would do). Why spend money doing something which would very likely hurt their bottom line?
If they cared about the clients that much, they could have easily sent them a letter explaining that many people convert their super to a pension at age 65 and this is something they should investigate or seek advice. It would take their legal team no more than a couple of hours to knock up a letter which complied with the law.
What stops any modern thinking super fund or insurer sending a “Did you know?” information sheet with any correspondence they email or post (as well as online) to their customers or policyholders? That method could be used to inform these 10,000 people for example and say “contact us or an adviser” if you want further information…
In other words put some onus back on the customer by continually educating them and stop with the “we can’t ring them” rhetoric as there is always another way…
And to think, no one but you thought of this before now? Legal issues over?
“modern thinking” – what on earth does this mean?
There is nothing basic about advice, there is so much more to it than just product.
To some/many it is only the product? The product is a big bucket of $$$$$$$$$$$$$. With that much money comes power?
“One of the retail super funds told us last year, I forget the exact numbers, but it was more than 10,000 members that they had out of their cohort of nearly a million members who were in their seventies, they knew had not been contributing for a long period of time, were still in accumulation phase, and had not nominated to go into pension phase, and they were too scared to ring them,” he said.
I suspect ASIC would love to find a way to legally attack this fund and have all FUM rolled over to Industry Super?
With those sorts of numbers I’d be thinking it already was in an industry fund
Yes, hard to imagine how Industry Super will ever manage their numbers into the future – i suspect Treasury will develop some sort of automatic lifetime pension which auto starts on some trigger and Industry Super gets to keep the capital long term?
I just can’t imagine any scenario where members get control of their Superannuation capital/money in the long run?