FPA chief Dante De Gori has expressed concern about the feasibility of the main proposal in a new report released by Rice Warner and the Financial Services Council (FSC), which suggests dividing personal advice into ‘simple’ and ‘complex’ sub-categories.
The proposal, aimed at reducing the cost of advice and increasing access for consumers, calls for usage of “online tools backed by call centres” for ‘simple’ advice in areas such as budgeting, mortgages, life insurance strategies, savings and superannuation contributions, with call centre teams led by a qualified financial adviser.
Complex personal advice that involves higher levels of risk such as retirement strategies, estate planning, investments, gearing and aged care would be carried out by a qualified adviser, the report states. Once these strategies are in place consumers could go back to being ‘simple’ advice clients.
In a session held at the FSC’s Advice Summit to discuss the proposal, De Gori said while he agrees with the concept of splitting advice definitions the proposal in its current form should be treated with caution.
“This issue of simple versus complex… in theory it makes a lot of sense but in practice its quite difficult and complex,” the FPA chief executive said.
Clients may present what appears to be a ‘simple’ advice need, De Gori explained, such as the need for help with superannuation contributions, but there may be more complex issues behind that. “Symptoms alone aren’t enough to identify a simple advice issue,” he said.
The proposal also called for a watering down of Best Interests Duty for ‘simple’ advice providers. If low-cost providers like call centre operators are providing advice under these circumstances, De Gori ventured, there is good reason to harbour concerns.
“No disrespect to a call centre operator, but we would caution against anyone who’s not qualified and trained to give that advice,” he said. “I think it’s important that if you’re going to give advice to mum and dad Australians that person should still be trained and qualified.”
There’s a disconnect
Consternation about the report and its applicability to the advice sector came just an hour after the assistant minister for superannuation, financial services and financial technology, Jane Hume, said the government was working closely with ASIC, industry bodies and advisers to “unravel the Gordian knot that financial advice has become”.
“We want to identify obstacles to productivity and profitability, and we want to reduce the burden on your industry and its participants,” Hume said in an earlier session.
While the senator praised the work of industry representative bodies and stakeholders in coming together to present a “unified voice” to Canberra, reaction to the FSC report highlighted how disparate opinions on the industry remain.
Sitting alongside De Gori in the afternoon’s panel, licensee Paragem’s CEO Nathan Jacobsen agreed with De Gori that while the Future of Advice report had conceptual merit, the proposal that unqualified providers take over large tracts of advice needed to be treated with caution.
Jacobsen, who sits on the FSC’s own Advice Board Committee, brought up the report’s assertion that over 60 per cent of consumers are “unwilling to pay anything” for advice and “only a very small percentage” are willing to pay more than $250.
“I’m going to push the boat out and say I don’t think advice will ever get delivered at that price point by an adviser under the current regime,” Jacobsen said.
A simple advice template could work and would help to bring costs down, he explained, but it doesn’t bring down enough operational costs to make “a few hundred dollars” viable as a remuneration level for advisers.
“Advisers don’t want to take on clients below $4,000 to $5,000,” Jacobsen said. “So there’s a disconnect.”