Neil Younger

Judging by the latest round of Quality of Advice Review discussions and roundtables on Treasury’s conflicted remuneration proposals, some consumer groups and industry superannuation funds would rather consumers go without access to life insurance advice than for commissions to stay.

But consumers, the very people that consumers groups represent and serve, need and deserve good advice.

Yet Treasury’s conflicted remuneration paper found that the number of new life insurance policies issued since the introduction of the Life Insurance Framework had declined. The ASIC file review also indicated “an increase in the age and wealth of clients that receive life insurance advice,” demonstrating that advisers are focused on “those with higher sums insured and higher premiums” because it is not economically viable to service ordinary Australians.

Rather than get hung up on details around remuneration and definitions, the financial services industry including consumer groups, super funds and regulators, first needs to agree that Australians, regardless of their account balance, should have access to good advice.

Let’s all agree that demand for personal advice is high and isn’t close to being satisfied.

From that premise, it’s hard not to embrace the changes being proposed by the review, which aim to make good advice accessible and affordable to all Australians, whether their needs are big or small, complex or simple.

The review and Michelle Levy have ambitiously tried to strike a balance between protecting and serving.

This is no easy feat.

There is usually a penchant for regulators and policy makers to focus on protecting, which inevitably comes at a cost to serving.

We have seen this dynamic play out in financial advice where the sharp focus on strengthening consumer protections has significantly diminished the industry’s ability to serve.

The process of giving advice has become so compliance-orientated and systematised that it has taken a form that is overly complex, costly and, therefore, largely irrelevant.

The result of having so many protection mechanisms baked in is two-fold: firstly, consumers are being forced to fit into a pre-existing mould (holistic, face-to-face and ongoing) and, secondly, personal advice has become so costly to deliver, only a privileged few can afford it.

But as Michelle Levy states in the advice review consultation paper: “consumers want good advice – not documents and processes”.

The review is proposing a different way of regulating advice.