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Advice review to help consumers move up advice ‘continuum’: Panel

Bringing super funds and other institutions into the advice ecosystem should benefit consumers by creating an organic path for them to follow as their needs become more complex. More would benefit if the review also took into account the SMSF capabilities of accountants, stakeholders believe.

The Quality of Advice Review proposal for a new class of adviser that will provide ‘simple’ advice should help to create a smoother gradient of advice provision, according to a panel of industry stakeholders who opened to the SMSF Association’s National Conference in Brisbane last week.

The delivery of this lower class of advice will ultimately see more people acclimate to the notion of getting help with their retirement finances, and become more inclined to graduate from unadvised, APRA-regulated fund membership all the way through to advised self-managed superannuation fund trusteeship, the panel put forward.

“What you’re going to see is a gradient of advice,” said KPMG partner and wealth management lead Linda Elkins, who went on to explain that as it stands, super funds and accountants are “terrified” to answer simple queries because they risk veering into personal advice and breaching the Corporations Act.

  • “[The proposals will] allow them to answer basic and simple questions in a safe regulatory environment, both with consumer protection and also with clear rules for the people giving the advice,” Elkins continued, noting that people who receive these smaller doses of advice will feel more comfortable graduating to holistic advice as their needs become more complex because they’re not only used to the process, but used to seeing the benefit.

    “The more people get that lower level advice… the more likely they are to ultimately move up to the continuum to where they do get holistic advice from an independent adviser,” she said.

    The concept of consumers graduating through more complex vehicles in the retirement ecosystem was earlier introduced by Heffron managing director Meg Heffron, who noted that one of the reasons SMSFs are burgeoning is that APRA-regulated funds are doing their part by getting younger members interested in superannuation.

    “I wonder if one of the reasons we’re seeing a boost in SMSFs is simply because the APRA fund sector has done such a great job at engaging their members in super, which then means they get more engaged and want to have an SMSF,” Heffron said.

    The Quality of Advice Review, however, has the potential to codify this gradation of complexity for consumers, and put them on a path that is clearer and more well defined.

    According to Kate Farrar, CEO of the $31 billion Brighter Super, the advice review proposals are already forcing APRA-regulated funds to change their business models, with more robust attention given to the “advice triage process”.

    “It’s going to fundamentally transform the APRA-regulated sector,” Farrar said. “You’re really starting to see it play out, actually, in some of the business models as they shift across the industry funds and the retail funds.”

    Smoothing the path won’t be easy

    The path towards a more streamlined, step-by-step retirement ecosystem for advisers won’t be without obstacles.

    APRA-regulated funds will always seek to retain as much funds under management as possible, of course, which means swaying consumers away from the self-managed option. When asked by Heffron, tongue-in-cheek, if we’d ever see a day when APRA-regulated fund advisers would recommend a member switch to an SMSF, Elkins replied “Well, no.” Both agreed, however, that each side of the superannuation fence should work together for the benefit of consumers.

    The advice review’s proposals also leave the fate of accountants in the SMSF process unclear, which creates a hole in the advice ‘continuum’ the panel envisioned. While giving super funds and other institutions and expanded role in advice delivery will benefit consumers with simpler advice needs and that will eventually flow up and into the SMSF sector, the accountants that were formerly servicing SMSF trustees via the limited license provision have mostly retreated, meaning those current trustees have lost a huge swathe of professionals that were formerly available to assist them.

    The SMSF Association’s Burgess reiterated what has been an ongoing policy plank for the group, saying the role of accountants needs to be considered as part of the advice review’s proposals.

    “We think the Quality of Advice Review needs to extend to accountants because they’re not part of the equation,” Burgess said. “They’re suitably qualified, but essentially they are locked out of the system.”

    Heffron reiterated the point, noting that even though accountants weren’t considered part of the solution in the government’s initial suite of proposals, this could change.

    “I’m crossing my fingers really hard that the eventual outcome [involves] a sensible place for accountants with expertise to support their clients on SMSF issues, because we currently have a regulatory setting where every accountant I’ve talked to is terrified of saying very normal things, because they’re worried it’s going to be perceived as advice,” she said. “They’re holding back and not helping their clients in a way that they could be capable of.”

    Tahn Sharpe

    Tahn is managing editor across The Inside Network's three publications.

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