Duncan McPherson

Expanding the definition of personal financial advice and allowing more individuals with lower qualifications to provide it could radically transform the delivery of advice.

This expansion should reduce the number of people who receive no advice at all just because their relatively simple needs can’t currently be met by their superannuation funds.

But the potential benefit to members of super funds – which are widely expected to be the main beneficiaries of these two key changes recommended by the Quality of Advice Review – is illustrated vividly in an analysis of member interactions produced by Link Advice’s retirement and superannuation solutions business, which wants to ensure more Australians have access to information, guidance and advice.

Every year contact centres operated by Link Advice receive more than 3.5 million telephone calls from super fund members, on behalf of Link Advice’s clients. A lot of those calls are straightforward – account balance enquiries and the like – but around one in seven, or about half a million calls a year, have an advice-related dimension to them.

That’s when things can start to get complicated. Depending on the nature of the advice issue, Link Group can provide general advice, personal advice under intra-fund advice rules, scaled advice, or a referral for comprehensive advice.

In 2022, Link Advice booked more than 20,000 advice appointments with fund members – an average of about 80 appointments every working day of the year. These meetings were mostly with members aged between 55 and 66; and most member account balances fell in the $200,000 to $1 million range.

About 70 per cent of the people who attended one of these meetings received an advice outcome of one sort or another. The 30 per cent who didn’t go on to get advice were either satisfied by a combination of simple general advice or education; no longer had an advice need after the call; or were satisfied by “myriad other outcomes”.

Link Advice CEO Duncan McPherson tells Professional Planner those advice outcomes ranged from structured general advice, “which is more strategy and concept-based, like retirement health checks and retirement options”, to personal financial advice – primarily intra-fund – to a referral for comprehensive advice.

McPherson says around 2000 members were referred to comprehensive advice “because we were unable to provide them advice under the current advice framework of the [superannuation] sector”, and that’s the point at which a significant number of people are lost to the advice system.

“Less than 7 per cent ended up with advice, as defined by an SOA [Statement of Advice],” McPherson says.

Link Advice analysis shows that more than half of the people for whom an advice referral was appropriate didn’t take it up because they believed they were not ready for advice, or because of the cost. A further 15 to 20 per cent cancelled before the first advice appointment. And the remainder of the total of roughly 20 per cent who didn’t take up an advice offer dropped out before the second appointment.

Link is not the only provider of advice services to super funds, so it may be reasonable to assume that experiences like this are replicated elsewhere and that they reflect the situation for a very large number of super fund members. McPherson says the analysis demonstrates starkly why super funds should be permitted to expand how they offer advice to members, specifically, through so-called non-relevant providers.

He says super funds are clearly an immensely popular port of call for millions of people who have questions that may require advice to answer, but as things are structured their fund can’t always help them, even with relatively simple issues.

“The reason I’m so vocal on the QAR recommendations relating to expanding the definition of personal advice and introducing non-relevant providers is because of these numbers and that I believe we have an obligation to provide support to more people,” McPherson says.

“If we can implement all of the recommendations, those roughly 500,000 members who have a simple question about their super fund can have it answered, whereas today they need to be referred to advice.”

McPherson says there can be an expansion of retirement advice to deal with the growing demand of people with uncomplicated personal circumstances.

“They can be advised through other means, like Link Group’s advice services, to enable more people to get access to advice,” McPherson says.

“Especially if we introduce non-relevant providers enabling us to recruit graduates and so on to provide simple advice, up to a team of relevant providers giving retirement advice partially funded by the trustee and partially funded by the member.”

McPherson argues there will be “a reduction in the number of people who drop out of the advice system” if super fund advice capacity is expanded, and there will be a benefit for the financial advice community because members of super funds exposed to the value of advice will be more likely to take it up outside a fund.

A decision on whether to adopt QAR recommendations to broaden the definition of personal advice, and to allow non-relevant providers to provide it, have been deferred by the government for further consultation, along with other recommendations including removing the general advice warning, introducing a “good advice” duty on advisers, and amending the Design and Distribution Obligations.

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