TAA warns of ‘back to the future’ return to vertical integration
Without putting guardrails in place for non-relevant providers providing advice, Australia runs the risk of a “back to the future” scenario that did not previously serve it well, according to The Advisers Association (TAA).
The TAA backed some of the Quality of Advice Review recommendations but believed great care needed to be taken in its implementation to avoid a return to vertical integration.
In particular, there should be guardrails around who should be permitted to deliver personal financial advice, the extent of the advice they give, the minimum education and qualifications they hold and the obligation to provide “good advice”, TAA said.
“It is very clear, particularly as a large percentage of the population nears retirement, that we need to enable more people to give personal financial advice,” said Neil Macdonald, TAA chief executive.
“But while the advice profession continues to debate what the future should look like, industry funds have continued giving advice and are taking over the role previously played by the banks.”
However, the low production of Statements of Advice (SOAs) led TAA to believe general advice was being provided where personal advice was likely required, especially in preparation for retirement.
Macdonald said: “There is a world of difference between giving people general information and giving them personal financial advice that meets their needs.
“There is also a risk that general advice will continue to be provided instead of ‘good’ personal advice, and that doesn’t address the issues of the past.”
As recently pointed out by the Australian Institute of Superannuation Trustees (AIST), the review’s recommendation on expanding the definition of personal advice to require non-relevant providers to provide good advice was an important consumer protection method if the existing safe harbour provisions were to be removed.
“If it is not, then complex retirement advice could easily be provided to members of a super fund, without any consideration of issues that profoundly impact consumers in retirement — for example, Centrelink benefits, who and when to move to pension phase, etc,” Macdonald observed.
AUTHOR
Rhea Nath
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