Lingering uncertainty on scaled advice

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Scaled advice remains an area of considerable uncertainty despite the Future of Financial Advice bills having passed the House of Representatives. 

That was the bottom line of a Money Management roundtable held in the immediate aftermath of the legislation passing the lower house, involving Financial Planning Association (FPA) chief executive Mark Rantall, Association of Financial Advisers (AFA) chief executive Richard Klipin, Mercer's Jo-Anne Bloch, and Premium Wealth Advisers general manager Paul Harding-Davis.

Rantall told the roundtable that where scaled advice was concerned there was still considerable uncertainty about how it could be provided under the new best interests test.

He said that as a result of matters not being clarified prior to the legislation being debated in the Parliament, it was believed the Government would provide greater clarity in an explanatory memorandum.

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Rantall said that while Treasury officials had indicated they believed the provision of scaled advice would not require a full fact-find on the part of financial planning, the FPA believed it required more comfort on the issue.

"We need more comfort than that, and we believe that comfort is going to be housed in the explanatory memorandum," he said.

Rantall said the FPA and the broader industry would need to work with both Treasury and the Australian Securities and Investments Commission (ASIC) to ensure appropriate regulatory guidance was received to enable scaled advice to happen.

Mercer's Bloch said, however, that reassurances had been received from both ASIC and Treasury behind the scenes that scaled advice would be allowed to work and blossom.

"What is important is that the licensee has flexibility so that the underpin is there to allow it (scaled advice) to occur," she said.

"And Mercer, for example, will never provide transition to retirement advice on the phone, but some other licensees may choose to do that."

Bloch said it needed to be understood that the question of what was included in the context of intra-fund and scaled advice was never going to be in black and white, and it might fall to the licensee to choose how they wished to comply, and therefore what services they were prepared to offer.

However, Premium Wealth's Paul Harding-Davis said that as attractive as the provision of scaled advice might be, many of Premium's members would not have the scale to deliver such an offering.

"In all honesty I think we are sitting in the camp where scaled advice is just not going to be commercial for us and isn't going to suit our client base," he said.

What is more, Harding-Davis said he had seen nothing in the legislation thus far which would convince him that Premium's advisers should not do a full, holistic fact-find.

However, he said the main impediment for Premium with respect to scaled advice was not technical, but commercial.

The AFA's Richard Klipin agreed that the commercial factors mitigate against many financial advisers providing scaled advice, particularly specialist corporate superannuation fund advisers.

"They are going to have to find a commercial way to deliver scaled advice in the services and education piece they do," he said.