AIOFP backs super funds over banks in advice

Mike Taylor

Managing Editor and Publisher

7 July 2023

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.