Super funds, insurers welcome ‘significant step’ to expand advice arena

The second tranche of reforms for the advice industry has received strong support from superannuation funds and insurers.

Earlier this week, Financial Services Minister Stephen Jones unveiled a second tranche of reforms for the advice profession, outlining rules around the new class of adviser (NCA) and simplification of documentation. 

It provided further details around the new class of adviser, who will be required to complete an Australian Qualifications Framework Level 5 diploma, to ensure they have the expertise to provide high-quality simple advice, such as choosing an insurance policy or basic questions about retirement.

It also outlined what advice topics can be paid for through superannuation and the fact super funds will be allowed to provide helpful “nudges” to drive greater member engagement at key life stages.

The announcement came just under a year after the Tranche 2 reforms were first announced on 7 December 2023. 

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Importantly, Minister Jones clarified NCAs will be prevented from providing advice on more complex topics, such as establishing a self-managed superannuation fund (SMSF) or advising on a managed investment scheme.

Instead, they will be restricted to providing advice on products issued by prudentially regulated entities.

Superannuation associations like the Association of Superannuation Funds of Australia (ASFA) and Super Members Council (SMC) have welcomed the reforms that will enable super funds to employ NCAs to deliver quality, low-cost advice.

Earlier this year, ASFA research found one in two Australians have never accessed advice on preparing for retirement, reinforcing the need for quality, trusted financial advice to be more accessible and affordable. 

ASFA chief executive, Mary Delahunty, said the changes represent a “significant step forward” in offering access to affordable, quality advice for most Australians. 

“Financial advice is a critical ingredient in helping Australians build and protect their retirement savings. These reforms will empower more Australians to plan for their financial journey with confidence, enabling them to enjoy the security and dignity they deserve in later years,” she said. 

“ASFA is pleased to see that creation of the new class of advisers is accompanied by strong regulations and consumer protections to ensure high standards are maintained, alongside the increased provision of high-quality financial advice.”

SMC chief executive, Misha Schubert, remarked that access to affordable advice is the “huge missing piece of the retirement puzzle”.

“Most super fund members just want simple information to be able to calculate their total retirement income for them and their family. This package of reforms will enable that urgent need to be met,” Schubert said.

“We’ll examine the legislation closely to ensure strong protections for consumers. We look forward to working with government, Parliament, and all key stakeholders to pass these crucial reforms.”

The insurance industry, which will also be empowered to provide simple advice to both existing and new customers under the reforms, have come out in strong support of Treasury’s announcement. 

Currently, life insurers are restricted to providing customers with advice that is general in nature only.  

“Today’s announcement is an important step towards making life insurance advice more affordable and accessible for millions of Australians as they plan for their financial futures. If fully implemented, these reforms will unlock access to simple advice so people can get what they need when they need it,” said Kent Griffin, chief executive of MLC Life Insurance.

“These measures demonstrate that simplifying regulations and maintaining strong consumer protections are not mutually exclusive.

“Together they will provide the industry with the clarity needed to innovate while giving customers greater confidence in securing their financial futures.”

Fiona Macgregor, chief executive and managing director at TAL Group, noted the reforms will be vital to help Australians make decisions on financial products. 

“Life insurance provides an important financial safety net for millions of Australians. But the reality is, many Australians remain underinsured and under-protected, unable to easily access the right advice to set themselves and their loved ones up for the future,” Macgregor said. 

The Council of Australian Life Insurers (CALI) also pointed out the reforms will give Australians more choice about where and how they get advice on their life insurance needs. 

“This is a big win for all Australians who want to secure their financial future. The positive impacts of these reforms will be felt over generations,” said CALI CEO Christine Cupitt. 

“This had to happen. We can’t continue to have almost three-and-a-half million people in this country who are underinsured and unprotected when times get tough.” 

Independent research commissioned by CALI previously found over 40 per cent of people want advice that’s more personalised and helps them decide how much cover they need and the products that best suit them.

“Our research shows that only a quarter of people want basic information only, proving just how critical these reforms will be to giving Australians the kind of advice they want, when and where they want it,” Cupitt said.

“Giving people more access to affordable advice is critical to helping them build strong financial safety nets for themselves and their loved ones.”