Very soon fintech companies and other commercial operators will have greater latitude to provide sporadic scoped advice, if you believe early predictions about the outcome of Treasury’s Quality of Advice Review.

If the questions posed in the Quality of Advice Review Issues Paper are any indication, the government believes scoped advice may hold the key to solving the advice accessibility and affordability dilemma.

This has potentially dangerous consequences.

The former government’s Covid-19 early release of superannuation program and the advice industry’s strong reaction to it provides some insight into the challenges with scoped advice.

The biggest one being it can be myopic and therefore potentially out of context.

For example, something as seemingly simple and immaterial as allowing individuals suffering financial hardship due to Covid-19 to withdraw up to $20,000 from their superannuation could have unintended long-term consequences. It could affect when a person can afford to retire, buy a home and how much they can borrow.

Theoretically, there is nothing wrong with episodic scoped advice so long as people understand the impact of implementing that advice on their current and future financial situation.

Unfortunately, in the case of the early release scheme, it is unlikely the 3.5 million Australians who applied fully appreciated the potential downside of dipping into their retirement savings.

Context is crucial in financial planning.

Turning pipedreams into SMART goals and ultimately reality

Over the past 20 years, the ongoing separation of product and advice has led to more comprehensive, holistic advice.

The falling number of risk-only or investment-only specialists is evidence of that.

But despite the industry’s enormous progress, many advisers are still confused about the difference between the process of scoping advice and establishing client goals.

Looking back, the shift to holistic advice at the turn of the century led to a greater focus on client goals but many advisers still struggled to separate product from advice.