The question of who’s best place to deliver retirement advice to Australians remains very much a live issue and is only going to become more pressing as a growing number of super funds get their act together and work out a practical response to their Retirement Income Covenant obligations.
In the past week or so Professional Planner has recently published three articles written from three different perspectives but each addressing the issue of how to deliver more advice to more Australians as they approach retirement.
As luck would have it, in the order they were published the first article said that in the wake of the Quality of Advice Review, advice should be opened up to allow a wider range of providers to deliver advice to Australians – and that naturally incudes super funds.
The second article suggested financial advisers are best positioned to deliver the highest quality advice to people as they retire.
The third article said that demand for advice from super fund members is growing, and funds are best placed to deliver advice to the greatest number of Australians.
Yesterday Fidelity International and research firm MYMAVINS released a new report underlining the growing complexity of wealth transfer issues, and suggesting financial advisers are in the box seat to meet a growing demand for retirement advice.
These aren’t irreconcilable views of the advice sector. Taken together, the articles and the report paint a thumbnail sketch of an sector that looks genuinely exciting – one where there is growing demand, and where advice is accessible to more people because it is affordable to more people; and also one where high quality, professional advice is available to those who want or need it and can afford it.
Not an either/or solution
Although it is still unclear exactly who will deliver what as demand for advice continues to rise, what’s beyond doubt is that it’s not an either/or solution. It’s not either financial advisers or super funds that are going to solve the problem of delivering more advice to more Australians. It’s a combination, and it may yet involve other providers as well.
And financial advisers who feel threatened by the idea that super funds and others might start to encroach on their turf should be reassured by both he findings of the Fidelity report and the Conexus Institute’s assessment of retirement advice options, and the strides the advice sector has taken to professionalise over the past 10 to 15 years.
Financial advisers and financial planners – as defined by law – are rightly a set apart from the masses, including those likely to be employed by super funds or other providers of advice to the masses. Financial advisers are highly qualified, conform to a stringent code of ethics (and as an aside, it’s to be hoped that code isn’t diluted by, for example, the removal or neutering of Standard 3) and adhere to professional standards of conduct and behaviour. In other words, they’re almost everything you’d expect a professional to be.
The cost of the services they provide reflect that standing and the complexity of the issues they routinely address. The future for financial advisers looks bright – demand is increasing, the complexity of the issues individuals face is growing greater, and the supply of new advisers is restricted. Advisers should not feel threatened by new players entering the game.
Besides, it makes no sense to deny super funds the ability to deliver advice to their members, whatever form that “advice” ultimately takes. But it’s also clear that an individual who delivers advice or guidance, or whatever you want to call it, to a member of a super fund on a limited range of mostly super-related issues isn’t a financial adviser.
Standards set advisers apart
Financial advisers are and should be subject to a more stringent set of rules and standards than those who are not financial advisers. Those does not place them at a disadvantage – quite the opposite. It’s the regulation and the standards that apply to professional advisers that make their services as valuable as they are in the first place, and which should continue to set them apart.
But the critical concept here is that different types of advice or guidance should co-exist comfortably, in a similar way to how medical professionals coexist and are in fact supported by various allied health services.
In the past, the future of the advice sector described by the QAR and by various commentators has suggested there might be a two-tier advice structure with one necessarily regarded as superior to the other. That may be true in terms of qualifications and professionalism, but if you think about it from the individual’s perspective, they might see it differently.
One of the recent articles pointed out that super funds are seen by members as natural providers of advice – in fact, members increasingly expect their fund to offer advice. For those members, a relatively simple service guiding them through the major decisions they need to make as they transition from employment to retirement is just as valuable in relative terms as a full-blown financial plan and strategy solving the most complex estate planning or wealth transfer issues is to the individual who needs it.
Rather than thinking about advice tiers, it may be better to imagine different advice types existing side-by-side on a sort of continuum.
Financial advice as a professional service isn’t, and never will be, used by all Australians. It’s unrealistic to think otherwise. Advice delivered by super funds and other providers has a major role to play, but it’s a role that shouldn’t be perceived as a threat by professional advisers.
