Advisers ‘pincered’ by Govt, banks, super funds and insurers
ANALYSIS
It was only a few short months ago that some financial advisers were lauding the Assistant Treasurer and Minister for Financial Services, Stephen Jones, for his seemingly studied and measured approach to implementing the recommendations of the Quality of Review (QAR).
That changed significantly yesterday when those same advisers read his announcement on the manner in which the banks and insurers would be allowed back into the financial advice arena alongside superannuation funds via the creation of a new “class” of financial adviser – the “qualified adviser”.
For all those financial advisers who have fought hard and studied hard for the right to call themselves “professionals” the emergence of “qualified advisers” can only be disheartening. How will consumers know the difference between an adviser who is “qualified” and an adviser who has passed the exam and obtained multiple relevant degrees? Surely an adviser who is “qualified” will be a top choice?
Little wonder then, that the Financial Advice Association of Australia (FAAA) has expressed deep concern at the Government’s announcement and that even members of the Association of Independently Owned Financial Professionals have moved from expressing confidence in Jones to expressing their reservations.
On all the available evidence, financial advisers have been “pincered” by the Government which has set a course to deliver its promise of affordable financial advice by stepping well beyond the empowerment and enablement of superannuation funds to enabling to bring banks and insurance companies back into the equation via a limited advice.
Jones tried to prepare the way for his announcement by pre-briefing key stakeholders such that they issued early statements urging the adoption of the limited advice approach and then, yesterday, he attempted to assuage any financial planner concerns by suggesting that “qualified advisers” could be neatly corralled.
“Under our model, there will be a new class of financial advisers who will fill the advice gap by advising on less complex matters,” he said. “It is expected that this new class – to be termed ‘qualified advisers’ – will generally be employees of licensed financial institutions.”
“I have often said that the nut to crack on this was to nail the scope, charging and qualifications of this cohort. On scope, qualified advisers will focus on providing simple financial advice. On fees, qualified advisers will be prohibited from charging a fee and from receiving a commission, which will help to restrict their advice to simple advice. And on qualifications, as the name suggests, they will be required to meet a Government-mandated education standard.”
“The exact level of education will be determined in time, but a minimum standard of a diploma may be the right balance to be less onerous than the requirements for professional advisers. This will enable institutions to invest in these individuals to meet the scale that Australians need.”
What Jones didn’t say but might have added was that the banks now have scope to operate at the top and bottom of the food chain while avoiding the highly-regulated middle. They can provide limited advice to low-balance clients and private-banker wholesale advice to their high net worths. The bank boards will regard it as an exquisite outcome.
It also represents an exquisite outcome for the major insurers, most of which have exited ownership of financial planning groups but will now, nonetheless, have a means of advising clients on their products.
The devil of the Government’s approach will be in the detail, but financial advisers have every right to question why, given this likely outcome, they were forced to endure the Future of Finance Advice (FoFA), the Life Insurance Framework (LIF), the Royal Commission and the Financial Adviser Standards and Ethics Authority regime and the financial adviser regime.
They are entitled to ask that question because FAAA chief executive, Sarah Abood, is right in her analysis that the Government’s proposals wind back the clock at least five years. Some would suggest that time-frame is closer to a decade.
“Qualified” actually has two meanings. It can mean highly educated in a relevant field. Or it can mean restricted.
Let’s give Jones the benefit of the doubt for the moment and assume he meant “restricted”. In that case he needs to immediately clarify, by changing his nomenclature from “qualified” to the less ambiguous “restricted”. If he doesn’t do that, he is embarking on a deliberate and callous deception of long suffering consumers by using the term “qualified”.
Blind Freddy knows it’s designed to confuse the consumer.
As the Banks and Institutions have always done, they always hid the real bank ownership of most Adviser vertically purchased businesses under a non bank logo’s.
At the same time lobbied Govt who made Non Insto / Independent Advisers highly restricted. s.923A
Another great Insto Fraud in the making, Govt approved for political donations.
Nope,
do not give Jones any benefit of any doubt – he has had 18 months to come up with this garbage, he has shown his cards and has well and truly blown it big time.
Yet again Real Advisers get screwed.
I feel like I have been physically violated by Govt, Bureaucrats, Banks, Life Co’s and Industry Super Funds.
On the other side I feel RC 2.0 has just been instigated.
These reforms will cause as much financial harm as they will solve.
But of course the Govt, Bureaucrats, Banks, Life Co’s and Super Funds will never be held accountable for the disasters they create in their new Animal Farm.
Jones should be remembered historically for this creation.
He has to get it passed and by the looks of how long he is taking to fix the hot mess it will take ages.
This is never going to get over the line, financial advisers will fight them this time.
by the way happy to call them a sale agent. product agent restricted to that one product and no scope from that product.
That’s why he brought the Banks & Life Co.s in to guarantee LNP support.
ALP owned and run by Industry Super
LNP owned and run by Banks & Life Co.s
So true.. Perhaps we should be asking if we can go Michelle Levy for discrimination – establish a go fund me page.
Of course it’ll get up. The banks make political donations to both major political parties.
There is a very commonly used military term that sums up the current nicely – Charlie Foxtrot!
General Advice looks better and better as time goes on
The new tier of employee needs to be called something less misleading, intentional or not, it must change so it is clear to consumers. They must pay the ASIC Levy and fund the CSOLR otherwise Professional Advisers costs to deliver Professional Advice are going to sky-rocket. These employees actions will likely flood afca and Asics cost to monitor and litigate their conflicted “advice” cannot fall on Professional Advisers.
Perhaps Stephen Jones should also announce that he will continue in Parliament as a volunteer, since being paid for your work creates a conflict of interest!!
At the end of the day it all seemed very predictable. Labor is dependent these days on the industry superfunds for election funding and also from some unions, but less from the CMFEU for example, which also gives money to the Greens.
I have just had a copy of Mr Jones’ script fall off the back of a truck. The banks, who only temporarily gave up on getting back into “wealth creation?”, and who were only waiting for the noise around Hayne to subside, have been sitting back for some time, watching Mr Jones parry off some of the more excessive demands from his mates in the industry funds. The banks could see a model developing that suited them, even though it was set up for the industry funds. Behind-the-scenes, the banks have been lobbying heavily ( where is Anna Blythe’s diary) and I await with great interest to read the next report from the electoral office on the donations from the banks to the Labor Party.
It’s base politics folks – you pay the toll and you get the quick road to your destination.
As your editorial says, the banks want to flog their crap products in the lower end of the market and provide full advice to their private bank clients but ignore the middle of the market, which will be highly regulated by ASIC, who probably will have less to do. Standby for non-underwritten life insurance policies with pre-existing illness and injury exclusions and definitions that require dynamite to obtain a claim.
But those policies will be cheap, but not that cheap! Vertical integration is alive and living folks!
On the subject of electoral funding, you can bet your bottom dollar that both Labor and the Coalition will not be supporting full and timely disclosure of electoral funding as proposed by the Teals, the Greens and David Pocock. The big parties are very comfortable with the status quo, thank you!
One of the really curious portions of the Jones statement on Thursday was the reference to “qualified advisers”, working for industry funds or banks, who were NOT permitted to charge a fee for the advice. Why the emphasis? I was reminded of the 1999 determination by ASIC which put Westpac life out of the advice business for 3 months, with a determination that Westpac advisers were in breach because they had been telling their clients they didn’t take commissions for the sale of products, unlike those nasty advisers engaged by the likes of AMP, MLC and National Mutual. . Come to think of it, that was probably the last time ASIC showed enough kahunas is to take on the big end of town, because ultimately ASIC agreed with the industry arguments that the “salary” paid to Westpac advisers was justified by KPIs and sales performance over three months.
Is this a re-worked form of the famous industry funds advertising “we don’t get paid commission’s”, on the way to the ultimate abandonment of commissions in life risk. Anyone with any true experience in life risk knows that middle Australia does not want to pay fees for advice on life insurance and that such a dictum could effectively torpedo those of us who are left to advise on life risk alone.
Mr Jones is not the only politician to have promised so much, and delivered so little, while secretly looking after his mates. Joe Hockey for example was once a great mate of the AFA/ALA, but was nowhere to be seen when Peter Costello implemented the Wallis Report recommendations.
So much misplaced hope, for no gain.
Peter Johnson and the AIOFP have been the biggest cheerleaders of Stephen Jones.
They brought this on, and now have serious egg on their faces.
I hope they are now scathing in their assessment of their former poster boy.
Financial advisers are in more trouble than they realise as a result of this change. You must adhere to the fiduciary duty legal principles and act in your client’s best interest. Once this new system starts you will not be able to provide advice to your clients on most issues and charge a fee. If the client could receive the same advice from their super fund for free or for no more than the annual advice fee paid under the funds collective fee then you will be in breach of the best intetest duty if you charge for your advice. You will only be able to provide complex advice for a fee. Financial advisers have be finished off with this new system.
Totally disrespectful to the advice Industry.
One day the Advice Industry will find its own voice. Unfortunately it seems that only the vertically integrated super funds have a seat at the table when decisions are made.
Corruption at its finest!
If this new class of quasi-adviser who are basically trainee level get to call themselves ‘Qualified’, do the rest of us call ourselves ‘Overqualified Advisers’? What are they actually going to be ‘qualified’ for…………….?
I can get a Diploma in 5 days!!!
They certainly won’t be qualified as Financial Advisers if they are going to work for one product provider and promote a single vertically integrated product.
The public need to be well informed of this deception and misleading title the treasurer wishes to promote. According to these new parameters I would have been considered a ‘Qualified Adviser’ in the first year of my 24 year career as an adviser. The truth is I was no more than a green rookie at that stage. Lets be honest with the public.
You have just put the remaining 15,000 advisers through the rigorous ethical training, increased education, and the royal commission to maintain their licence and build confidence in the public image, and now the treasurer wants to turn around and deceive the public and turn back the clock.
Using those terms is not Ethical Treasurer!!
Yet again the golden rule is in play…..”The men with the gold make the rules”