AIOFP backs super funds over banks in advice
The involvement of superannuation funds in the delivery of financial advice is to be preferred to the re-entry of the banks, according to the Association of Independently Owned Financial Professions (AIOFP).
In a position paper published this week, the AIOFP said the Assistant Treasurer and Minister for Financial Services, Stephen Jones had made clear that superannuation funds were preferred to the banks in the distribution of financial advice and information to consumers.
“We agree, Banks are driven by Shareholder priority outcomes and Super Funds have a fiduciary duty to their members, not perfect in a vertically integrated context but workable considering the ideal industry model is not achievable at this point in time,” it said.
As well, the AIOFP has recommended that three categories be created:
- Relevant Advice providers.
- Non – Relevant providers.
- Risk Insurance Advice providers.
Relevant Advice providers comply with the prevailing Laws and provide financial advice across the broad spectrum of the information universe.
Non – Relevant providers give factual product information on specific products within the Super fund/Institution they are employed by outside of Advice regulation. This includes Centrelink information and generic retirement planning strategies related to their account balance after completing an approved training program.
Risk Insurance Advisers [new entrants] must complete an approved Risk focussed Diploma course [unless covered by the 10 year rule] and pass an amended risk/ethics orientated exam. Risk information constitutes around 20% of the information universe suggesting the course duration should be 20% of a 3-year degree course for new entrants. If a Risk Insurance Adviser wants to move into full advice, they must comply with the prevailing laws for Relevant providers. Serious consideration should be given to recently displaced LIF/FASEA Risk Adviser victims having an amnesty period to return as a Risk Insurance Adviser after passing a revamped FASEA/Risk exam. Risk only Advisers today number less than 800.
The AIOFP paper said the term “Advice” should be excluded from the Non – Relevant provider vocabulary to avoid confusion for consumers.
It said Relevant Advice and Risk Insurance Adviser Providers should be subject to a best interest duty and consideration should be given to Non Relevant providers operating under a ‘Good Advice’ process once its parameters are known.
“The Life Insurance Framework Legislation [LIF] has and is an unmitigated disaster for the Risk Insurance Industry and more importantly consumers whose premiums have doubled over the past 5 year, strong consideration should be given to turning the industry back to pre-LIF conditions,” the AIOFP paper said.
This recent email from the AIOFP goes even further than this article suggests. It specifically states:
“With INDUSTRY SUPERANUATION FUNDS [IFS] emphatically winning the ‘27 year war’ against the Banks over market domination, they are an indelible part of the Advice solution and must be included in any planned strategy – it is also very clear the Minister favours this direction.”
He seems to be suggesting that it should be mandatory to include an industry fund in any advice strategy. A couple of things on this. Firstly, this sounds like he is providing financial advice. Is he licensed to do this? Secondly, isn’t it remarkable that an industry association with the words “Independent” in their name, would actually be pushing one type of fund over another. This does not seem very independent does it?
It is also nice how he asserts what the Minister favours as if he can speak on behalf of the Minister. Projecting influence is part of his game.
This is all quite remarkable. I wonder if the next thing in this ‘conversion’ process will be for Peter to appear in a “compare the pair” advert.
Frankly, I prefer to ban both banks and superfunds. But politics is the art of compromise, and if the compromise is to ban the banks but not the industry funds from financial advice, then maybe I’ll settle for that. But I could come back sooner or later, having established a base position.
If we allow the banks back in it will be Robo advice and crap products. Our clients still hold rubbish death cover policies issued by the banks at their height of glory in the mid-2000’s. This week I researched a St George “Quick Cover” term life policy issued under the banner of Westpac Insurance Services, now the property of TAL.
Firstly sold without any advice. It purported to be a death only policy but in reality was an accidental death policy. No underwriting but a pre-existing illness and injury exclusion operated on any known, OR UNKNOWN, sicknesses or injury in the 24 months pre-policy start date, AND there were separate 180 day exclusions for any sickness or injury, known or unknown, that arose in the first six months of the policy.
Even better, if the policy lapsed because of your credit card was scammed, there was a fresh 180 day set of exclusions.
The banks did not give a fig. The clients thought it was a genuine “ALL RISKS” death policy. This is what banks will do if they are let loose again and that’s just risk policies. We cannot afford to let that happen. As to our friends in the industry funds, I believe they will be NO real threat to the risk specialists, at least until they revise those horrible default death and TPD policies which of course have their own set of anti-selection measures designed to reduce the capacity to pay claims and in particular TPD claims.
Well done AIOFP. The membership application is in the mail
Having worked as an Adviser for one of these Super funds and also a Bank, Peter has rocks in his head. The sales tactics in Super funds are next level compared to a Bank….Only recently I sent a third part authority to a Super fund and there staff called the client offering their Advisers. The banks had big pockets and a mistake was treated like an advertising cost… Super funds believe they are politically untouchable.
I tend to not to listen to people that start their emails off as “Dear Comrade”….and someone that dosen’t welcome Advisers, with University degrees. It seems like the AIOFP has a nice little niche going attracting the 5%-10% of advisers that had their head stuck in the sand for the last 10 years.