Understanding scope the key for institutions re-entering advice

Speaking on the ifa podcast, Nigel Baker, chief executive and founder of Scientiam, said that the Quality of Advice Review’s (QAR) goal of enabling more people to access advice is heading in the right direction.

“In my view, I think what they tried to do was actually really positive and say, ‘Look, let’s take a fresh look at this. Let’s assume that the qualified advisors are going to do the right thing and let’s assume that the institutions are going to do the right thing and let’s work out a way that everyone can access the information they need’,” Mr Baker said.

“The advice journey doesn’t need to be full advice. The advice journey at the moment, everyone defines advice as you need to change product, or you need to be recommended a certain product.”

He explained that rather that a better solution is providing the level of advice that a client needs, and if it is something simple, it can be handled simply, but more complicated cases need to be referred out to someone that can handle the situation.

“As a chartered accountant, I can’t do audits for top 100 companies. It might be a huge fee, but I’m going to refer that out. It’s not something we can handle,” Mr Baker said.

“That’s, I think, where the financial advice industry needs to get to. It’s got to give the right advice to the right people at the right time. I think that’s what QAR is trying to do.”

Turning specifically to super funds providing personal advice to members, he said that a member should be able to ask their provider questions around their super, as long as they refer out when it goes beyond their scope.

“Can that provider be trusted to say, ‘Look, you’re now beyond our scope. We can give you the information or the facts, but we actually either have someone in house or we now refer you out to someone’,” Mr Baker said.

“The same thing with us as running a private practice. We can’t handle the millions of people who need advice anyway. We need to say to people who come in the door and say, ‘Look, there’s a few solutions out there, there’s digital, there’s industry super funds, there’s whatever’.”

He added: “The big dealer group-type compliance businesses, which, let’s face it, they had a conflict that they wanted everyone to use their products back in the day. They didn’t want to really play that game. They wanted to say, ‘No, no, no, everyone has to come through our channel’.”

However, Mr Baker made it clear that there will always be instances of poor advice and problems arising but doesn’t think it will be as bad a previous issues.

“There will be problems in the future. You can’t avoid that. But I think what you’re trying to do is free up the ability for the industry to give people more access to information and advice,” he said.

“Will it be as bad as the past? I don’t think so. I’ve got faith that I think it’ll be better in the future. I think the laws and regulations have shown how dangerous that is if a bank or a super fund really does the wrong thing, the damages that they have to pay out.

“But it’s not just been the banks and institutions. I mean, there’s so-called reputable firms like Dixon Advisory and all these people who did this completely the wrong thing for clients. It’s really that separation of product and advice is really where the issue comes. If people are selling product and giving advice then [it] becomes a massive problem. And that could happen again in the future.”

To hear more from Nigel Baker, tune in here.