FPA emphasises advice affordability to Parliamentary Committee
Jo-Anne Bloch
The key message of the Financial Planning Association’s (FPA) presentation to the Parliamentary Committee conducting the inquiry into the Structure and Operation of the Superannuation Industry was the need to make advice affordable for all Australians.
“We absolutely support financial services reform but there are a number of issues that still require refinement and some attention to be able to actually deliver affordable advice to a number of Australians,” FPA chief executive Jo-Anne Bloch said.
To illustrate the current situation in terms of advice and how much people should pay for it, the FPA provided the committee with a real life case study illustrating the amount of work involved in providing consolidation advice for a client who had membership in eight different superannuation funds.
The case study showed that by the time all of the legal obligations were fulfilled, the value of the service calculated on a standard hourly rate for the industry amounted to $4,400, a price many average Australians would not have been able to afford.
On the basis of practicality, the client was eventually charged $740 for the work performed, highlighting the commercial limitations of the system as it presently stands.
The FPA also clarified its stance on education surrounding superannuation and investing. It believes there should be no real distinction between education and advice and as such education should flow on from an advisory perspective.
“In summary, we certainly support greater education but we feel that if education comes from an advisory aspect you have no issues. If you are providing education and you’re asked the next question, ‘Which fund shall I invest in?’, then invariably you’ve moved into the advice space and you’re going to have to refer the person onto somewhere else,” Bloch explained.
The FPA was asked by the committee to compile two supplementary submissions. One is to do with defining the different advice models in the marketplace to make it easier for consumers to understand the basis of the advice they will be receiving.
The other submission involves self-managed superannuation funds (SMSF) that will discuss such issues as whether or not a minimum level of assets should be required before the establishment of an SMSF should be recommended to a client.
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