Marc Fabris (left) and Phil Anderson

A new breed of “qualified advisers” is headed your way, but the jury is out as to whether it is likely to hinder or help practices providing risk advice.

Announced as part of the government’s final response to the Quality of Advice Review – dubbed the Delivering Better Financial Outcomes package – these advisers are expected to be mainly hired by super funds and insurers, and potentially the banks.

The qualified adviser moniker has generated controversy with Minister for Financial Services Stephen Jones having conceded openness to changing the “nomenclature”.

Qualified advisers, as they remain known in the meantime, will provide advice on behalf of licensed financial institutions and will be subject to minimum competency standards (likely a diploma). They will be able to provide personal advice on less complex matters but cannot personally charge a fee or receive a commission for this advice.

Anthony Campbell, a personal insurance and risk adviser at Business Risk Solutions in Newcastle, doesn’t expect qualified advisers to become competitors of advisers writing risk.

“I don’t believe insurers will want to be dealing with anyone other than simple, straightforward mums and dads that have a salary and SG [superannuation guarantee] contributions,” he tells Professional Planner.

“They might have a couple of super funds to consolidate and want some life cover. Potentially these are the type of people that previously wanted advice but couldn’t afford it.”

Financial Advice Association policy general manager Phil Anderson expects planners to continue to focus on the risk needs of high-net-worth individuals (HNWI) and in particular, high-income earning clients who are likely to have a greater need for insurance.

However, he sees a big opportunity for super funds to use qualified advisers in servicing younger members with limited insurance needs. This group, he says, has become financially unattractive clients for advisers because they don’t generate a premium high enough to cover the cost of providing the advice.

If it costs $3000 to provide advice, then you need to have clients who are paying premiums of at least $5000 to cover the cost, given the 60 per cent cap on commissions, he says.

Anderson believes there is an opportunity for super funds to proactively use qualified advisers to encourage younger members to take up life insurance when they turn 25 or their superannuation balances edge up to more than $6000.

However, qualified advisers are not expected to stem the flow of holistic advisers out of the risk area.

Campbell says advisers have been moving out of writing risk advice because of reduced commissions and the increased time and costs required to produce the advice.

“None of that has changed with the QAR announcements,” he says.

There is a possibility, however, that qualified advisers could be employed by practices or licensees to help reduce the costs of providing risk advice and provide a better service.

Anderson says Minister Jones envisaged the majority of qualified advisers would work for financial institutions, but he has also suggested advice practices could employ them, as long as they met all of the eligibility criteria.

With qualified advisers being unable to charge for the provision of advice, Anderson says it would be interesting to see how things might work in practice.

“It could be the advisers charge for the advice and the revenue they generate might cover the costs of the [qualified adviser],” he says. “But we would want to await the final legislation to know that it would work.”

Risk Hub founder Marc Fabris can also see the possibility of moderate-sized licensees with some scale hiring qualified advisers as wage-based employees while the commission flows to the adviser.

He says qualified advisers could be an efficient way of supporting the network and working in a complementary way with advisers.

Campbell, however, can’t see practices being inspired to employ less experienced and less qualified advisers to do what they’ve already decided isn’t a profitable part of their business.

Meanwhile, like many others, Jake Wilkins, a financial adviser with Jake Wilkins Financial Planning in Moreton Bay, Queensland, is concerned that under-qualified employees of large institutions could appear to the consumer as more qualified than existing financial advisers because of the title.

Also, he says there’s the risk that consumer sentiment will grow to expect that financial advice to be free or significantly subsidised, eroding the strength of the pre-existing advice profession.

2 comments on “Practices could leverage the benefits of ‘qualified’ advisers”
    Avatar
    Jeremy Wright

    There is a monumental problem that is the fault of all politicians who allowed themselves to be hoodwinked by vested interest groups, that led to and brought about absolute mayhem caused by outrageous and unworkable regulation which meant most specialist risk writers walked away from the Industry and holistic Advisers retreating from Life Insurance New Business advice.

    The impact of which, caused premiums to double for loyal existing clients and millions of Australians being excluded from being able to get appropriate Life and Disability Insurance coverage to meet their needs.

    This is not some theory-based statistic that has little impact on lives.

    This is a disaster for every Australian who because of illness and disability, find they can no longer earn their income and because they have nil or insufficient Insurance to pay their loans and the plethora of bills that never stop coming, they go from being a Tax paying contributor in society, to a desperate person and family watching everything they have built, start to decline until all that is left, is despair.

    Many of us have articulated the issues around the current debacle and the solution has ALWAYS been to make the provision of risk advice a viable position.

    What has been mentioned in this article, if the Government shackles are loosened to allow holistic Advisers to bring into their practices, risk Advisers who only do risk advice, or encourage thousands of exited experienced risk Advice specialists to come back into the Industry and just do risk advice, without the insane Regulatory road blocks that has ZERO positive outcomes for anyone, then the Life Insurance Industry can recover and make the provision of Insurance advice a viable proposition for Advisers, which will also allow millions more Australians to have affordable and appropriate cover to meet their needs.

    Right around the Western world, where it has become fashionable to push degree qualifications and expel experienced people who do not follow the mantra of “more theory based degrees,” time and time again, the new wave system turns to SH-T, the theory-based way, FAILS and after total chaos, Billions of dollars wasted and lives destroyed, only then are the doors reopened for the experienced people to come back and fix the issues that would never have occurred, had the loony lefts and vested interest groups been ignored at the beginning, or better still, made ACCOUNTABLE for their actions.

    Avatar
    Kym Bailey CTA GAICD

    None of this makes a lot of sense and is another demonstration of Stephen Jones’s lack of understanding of this part of his portfolio. Why combine the job of Assistant Treasurer with the Minister for Financial Services? They are not related and we all know how big the Financial Services part is. He is either doing one part of his job well or, both mediocre.
    As to superfund providing risk advice, given the funds usually offer group policy options, is there a big advice component required? Or is is more along the lines of getting employees to sell insurance to those that didn’t tick the box on the application form?
    Risk advice is complicated and time consuming, but if you take the product offering as the given and work back from there, I guess it could fall into the “simple advice” category.
    I think risk advice deserves better than this.
    As to AFSL employing this new category of adviser, that seems awkward. Your license covers relevant providers that are all on ASIC taking responsibility for their advice. Then there is a group of employed advisers the licensee is monitoring and supervising. Sounds expensive and to be honest, the ethics of having advice being provided by the salaried person and the commission flowing to a Relevant Adviser seems tenuous. To do that arrangement well, the commission would need to come to the licensee and get distributed, all within the boundaries of the restrictions on conflicted payments.
    Ultimately, this new adviser category is to allow superfunds to have more touch points with members. Whether it leads to a greater level of financial literacy and engagement with their super is yet to be seen. We all know that, for this to be done well, it needs to be provided by a professional that gets to know the client and thereby helps them to understand what they don’t know and articulate their goals and objectives. That is genuine advice.

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