Retirement advice complexity = cost
ANALYSIS
The intersection between intra-fund advice, the retirement income covenant and the new category of financial adviser was always going to be the most contentious area of the Government’s Delivering Better Financial Outcomes legislation.
The financial advice profession has never been particularly comfortable with the concept of intra-fund advice because of instances where advisers have perceived superannuation funds have pushed the edge of regulatory envelope, particularly on issues such as transition to retirement.
Thus, the Financial Advice Association of Australia (FAAA) is absolutely justified in seeking to establish some boundaries around retirement planning advice as part of its broader lobbying efforts around the successive tranches of the DBFO legislation.
Reading the exposure draft of the second tranche of the DBFO legislation and listening to the associated ministerial rhetoric there can be no doubting that Government’s agenda is to, as expected, deliver more accessible and affordable financial advice via superannuation funds.
The use of superannuation as a delivery mechanism was central to Michelle Levy’s Quality of Advice Review and it has been central to broader policy thinking over a long period of time.
Indeed, when taken together with the obligations imposed on superannuation funds via the Retirement Income Covenant it is clear that the boundaries between simple and complex advice are likely to be tested and inevitably blurred.
The FAAA is arguing that retirement planning advice “will always be complex and costly” and should therefore not be provided on a collectively charged basis – in other words, it should be the domain of fully qualified financial advisers.
It has also argued for limits on superannuation funds “nudging” members to get advice, particularly retirement planning advice.
In doing so, the FAAA has gone to the core of the issue by seeking to define the difference between simple or complex advice, arguing that simple advice will typically be single issue and often about straightforward and low-risk financial products.
“In our view, retirement planning advice is always going to be complex. It involves many different aspects of advice and the client’s circumstances, often complex products, a long time horizon, numerous interdependencies, multiple risks, with high levels of expertise required to deliver it,” the FAAA’s submission to Treasury says.
What it does not say, but what should be obvious, is that the very complexity of retirement planning advice makes it expensive and therefore, in the view of the FAAA, inappropriate for being collectively charged within superannuation fund.
The challenge for the FAAA in sustaining this argument will be to find superannuation funds, focused on other priorities, ready to agree with them.
It shouldn’t be up to the super funds to ‘agree with’ the FAAA. It should be incumbent on the government to ensure Australians are protected.
This is looking like another pink bats/school cola fiasco in the making.
Only this time it will be ordinary Australians retirement lifestyles at risk.
Industry Super Funds own and run the ALP.
And with the ALP in charge for the next 6 years Industry Super Funds have almost total control of owning and running Canberra’s bureaucrats, ASIC, APRA, ATO, AFCA, CSLR, etc who will all be charging up their drinks and feeding themselves in the Industry Super Fund corporate sports boxes as they collude to do whatever ISFs want to do.
All whilst the ISF members pay for the food, drinks and corporate box seats.
Corruption in Canberra at new levels.
There are two questions here, not one.
First, should retirement advice which is always bespoke, be collectively charged. Clearly no in my view but it should be able to be paid from the client’s superannuation account even if it includes a spouse/partner who is not a member of the fund.
Second, what knowledge and competency does the person providing the advice need to have. This is a more difficult question but arguably the person does not need to be a fully qualified financial planner, particularly if the organisation (fund) is the advice provider and that organisation has a group of experts who contribute to the advice and they clearly take into account all appropriate circumstances not just their fund membership and the advice is then appropriately scoped so the client is fully aware what has not been considered/advised on.
Lets remember, its about clients getting good advice, its not about demarcation or turf wars.
But, if the criteria above was used I suspect some of the more sensible voices in the superannuation funds would question what advice they want to provide and maybe engage more with those of us who actually understand this stuff, because we actually do it!
Hard hat on!