The word “advice” as used in the term “general advice” is a problem, says Steve Helmich, executive director of financial planning at AMP.
“You could argue that it should be called ‘general information’, because general advice is basically advice around product, not whether the product is right for the individual,” says Helmich, the head of one of Australia’s largest non-bank financial planning dealer groups.”
As of July 2013, AMP employed some 3680 financial planners across its licensees AMP Financial Planning, Hillross, ipac, Charter and Genesys.
The clarity of terms such as “advice” is one of a few issues Helmich believes the government needs to address during the Future of Financial Advice (FoFA) consultation period it announced early this week.
“From the moment [a planner] says hello to a consumer, they think you’re giving them advice,” Helmich says.
“I think there probably needs to be some clear statements about the limitations of advice when it’s given, and this includes intra-fund advice for superannuation.
“People shouldn’t think they’re getting comprehensive, holistic advice when it is either limited, intra-fund or general advice.”
Difficulty implementing
Helmich believes the retrospectivity of fee disclosure was one area of FoFA the government would have had difficulty implementing in its previous form.
“Everyone would have gone to that with good intentions, but it was hard to get some of the data,” he says.
“You don’t just deal with your own products; we’ve got very broad product lists.”
But he believes that as a result of the proposed changes, this process will be “much cleaner and much clearer”.
He also says that grandfathering rules require greater clarification.
“I think we have to get some clarity on the grandfathering rules, which are determined to allow people to change and not to upset existing relationships, but would also allow people to move between licensees if they so wish,” he says.
An inhibitor to growth
Helmich believes the lack of clarity in this regard has been “an inhibitor to growing a new practice…which actually goes against having more advisors giving more advice to more Australians”.
“You’re inhibited from starting new practice footprints because of an inability to take over a client base, which was one of the unintended consequences [of FoFA], and that’s what I think is being worked out,” he says.
According to Helmich, a push toward professionalism underpins the whole fee-for-service model that AMP adopted across its retail financial planning business in July 2010, with the exception of its risk and superannuation teams.
“We thought it was the best thing to do for the position of financial planning,” he says.
“The principles of FoFA are that we want to get more Australians becoming more engaged in receiving financial advice…and putting the client’s interests first has got to be paramount in that.”
Different from the banks
He sees this is as a primary differentiator between AMP and the bank-owned financial planning dealer groups.
Recalling a meeting he had with AMP’s fund managers in August 2009, he says: “We told them that by 1 July, 2010, we will be moving to a fee-based advice model. If you can’t provide your products that are on our list without commissions, you’re off our approved list.”
While he says some met the decision with considerable surprise – he was messaged the following day asking whether he was serious – the change was accepted quite quickly.
“It’s pretty simple. Whenever you write a statement of advice, you need to ask yourself two questions: firstly have you put your client’s interests first and secondly, is the client in a better position as a result of your advice,” Helmich says.
“If you answer yes to those questions, things like the best interests duty will be met.”
A better result
“This pause [in FoFA reforms] will see us get to a better result. There’s certainly opportunities to make it more streamlined.
“I think there are some sensible requests and some sensible positioning, and we’ll get a better outcome because of it.”
Referring to the confusion and concern voiced by some commentators and stakeholders, Helmich says: “People need to have a calm head and stop the over-enthusiastic barracking for things which they’re worried about.”
“This will come out with a good result for consumers and a good result for Australia,” he says.