The Financial Services Council has doubled down on its proposal to split personal advice into ‘simple’ and ‘complex’ sub-sectors, enlisting the services of pollsters Pollinate to look into consumers’ attitude to financial advice and their openness to the proposed model.
Speaking on a FSC webinar this morning, FSC policy manager for advice Zach Castles said the group put the Future of Financial Advice report containing the proposal through to Pollinate “to inform our thinking”.
The result was a resounding affirmation that the proposal, which was produced in partnership with consultant Rice Warner, would be well received by consumers.
“Reforms breaking down [personal advice] into simple and complex was seen as a huge improvement,” said Pollsters head of society Pamela Souvlis, also on the panel.
Sixty-four per cent of poll participants were in favour of the FSC proposal, Souvlis reported.
These respondents understood that it would lead to a reduction in unnecessary documentation, she explained, noting that the current compliance regime does nothing to engender trust between consumers and advisers.
“The documentation and disclosures… consumers don’t see that as being anything other than the fine print, people covering their asses,” Souvlis said.
Theory and practice
The original Future of Financial Advice report was headlined by a proposal to divide personal advice into ‘simple’ and ‘complex’ categories, which would hopefully reduce the cost of advice and increase access for consumers.
Separating advice this way could help make less complicated issues like budgeting, life insurance and debt consolidation cheaper and more accessible for “average family consumers”, argued Rice Warner.
Among the more radical suggestions, it was envisaged that “online tools backed by call centres” would provide ‘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.
At the FSC’s Advice Summit, held in October last year to announced the report’s release, Financial Planning Association chief executive Dante De Gori expressed a measure of support for the the concept of splitting advice definitions but said the idea should be treated with caution.
“This issue of simple versus complex… in theory it makes a lot of sense but in practice it’s quite difficult and complex,” De Gori said.
Clients may present a ‘simple’ advice need, De Gori explained, such asking for assistance with superannuation contributions, but there may be more complex issues behind that. “Symptoms alone aren’t enough to identify a simple advice issue.”
The ineffectiveness of advice documentation and the need to fix what the FSC’s Castles called a “broken” advice system were core themes at the FSC session.
“The SOA in many ways has been an alienating defensive document that increases anxiety rather than reducing it,” Castles said. “The model of advice needs to be looked at in terms of simplifying it.”
The current advice system and the way it defines the service of advice mean very little to clients under the current arrangement, Pollinate’s Souvlis explained.
“It’s kind of gobbledygook to the consumer right now,” she said. “Those definitions don’t have any meaning to consumers.”