Insurers next ‘cab off the rank’, says Abood

Speaking on an ifa webcast about the government’s response to the Quality of Advice Review (QAR), the chief executive officer of the Financial Advice Association Australia (FAAA), Sarah Abood, said Financial Services Minister Stephen Jones is allowing superannuation funds to expand their role in financial advice as a “trial run” to essentially test the waters.

“When we listen to the minister, when we hear the way those recommendations are being promoted and talked about, it’s very much that this [is] allowing people who are not financial advisers to give advice to people that that would be a big change and I think in the minister’s head, he is thinking let’s do a trial run with the super funds,” Ms Abood said.

“Let’s see how it works in super funds and if we iron any kinks out of it, we can, with more confidence, extend it more broadly.”

More recently, she said talk has shifted to whether life insurers “might be the next cab off the rank”.

“In both cases, it’s because there is an existing duty at law to preference the interests of clients or members.

“For insurers, it’s the duty of upmost good faith, for trustees, it’s prioritise the interests of members.”

Ms Abood did agree with the QAR lead, Michelle Levy, that when there is a duty to both prioritise the interests of members as a whole and the individual to whom information is being provided, “you can find problems”.

“There are funds that are providing advice under the current laws now and they’re able to do so where they are providing comprehensive advice, they’re charging for it and they’re doing so under the current regime,” the CEO said.

“The issues that our members have are more around who exactly is going to be giving this advice, is it going to be a digital tool, is it going to be a human being and what knowledge do they have to enable them to do that irrespective of whether the duty is the best interests of the member or good advice for the member? Either way, it can’t just drag a backpacker from the street and put them in a call centre. You need to be using people that have knowledge that won’t blow the client up.”

Ms Levy has argued that the government’s decision to sideline her good advice duty is problematic because under the current regulatory regime, funds face a conflict between two obligations.

Namely, Ms Levy assessed that a fund trustee’s obligations under the SIS Act [Superannuation Industry (Supervision) Act 1993], to exercise its powers in the best financial interests of members and to promote their financial interests as a whole, conflict with the duty to act in the best interests of an individual member receiving advice.

According to the QAR lead, it is impossible to ask the trustee to reconcile these duties.

QAR recommends banks, insurers, and funds provide advice

The government has so far said it intends to consult further on Ms Levy’s recommendation to allow banks and insurers into advice.

However, speaking at the House standing committee on economics on Wednesday, NAB CEO Ross McEwan said NAB has “no plans” to “go back into that market”.

“We’re out of that space,” Mr McEwan said.

“It would have to be quite a change in legislation to twist my arm to go back into it.”

He did, however, recognise the need for more advice to be made available to Australians.

“I think that Australians do need to get advice particularly as they get closer to retirement, but that’s not a service that we’re in a position to provide.”

To hear more from Ms Abood and Ms Levy, tune in to our webcast here.