Full advice licensing needed on CIPRs says KPMG
Superannuation funds providing quotes or illustrations around so-called comprehensive income products for retirement (CIPRs) should be required to hold a personal advice license, according to major consultancy firm, KPMG.
In a submission largely authored by former senior union official and now head of Wealth Management Advisory, Paul Howes, KPMG has also warned against the danger of CIPRs being open to mis-selling.
The submission said: “Given the CIPR offering may be irreversible, we recommend that trustees must hold a personal advice licence when producing disclosure materials, providing quotes or illustrations, tailoring communication to a particular member, or providing advice including the provision of a product disclosure statement to a prospective member by a call centre”.
The KPMG submission has also suggested limitations to suggested safe harbour arrangements applying to CIPRs, stating that while KPMG welcomes a safe harbour design feature that supports trustees to consider the best interests of a cohort of members rather than the best interests of every single member, it believes best interests obligations should be inherent in product design.
“While a safe harbour may de-risk CIPRs from potential members’ best interest duty complaints, we do not support the circumvention of a trustee’s best interest obligations in the design of CIPR,” it said. “We therefore recommend that the CIPR framework incorporate a governance framework to promote and protect quality standards.”
To facilitate this, we agree with requiring either regulator authorisation or third party certification of CIPRs. We also recommend that the Government and/or trustees provide clarity as to the mechanism for redress in the event that members are not satisfied with the product they have purchased.”
The KPMG submission also recommended that the CIPR framework be technology agnostic to enable trustees to make a determination whether to make CIPRs available through digital advice.
“It is our view that consumer protection mechanisms exist and the law already enables retirement advice to be provided through digital advice,” it said. “We note that a digital advice solution provides trustees with the potential to broaden access to advice to a greater proportion of their members and therefore the potential to support more members in implementing better strategies regarding their superannuation at retirement.”
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