Do banks have a role in advice?

Speaking on the ifa podcast, Kelly Power, chief executive officer of superannuation at Colonial First State, said that while the royal commission exposed serious misconduct within the banking sector, it was also a valuable entry to the industry for young advisers.

“I just think it’s a completely different world that we’re in now, so much has changed, there’s been so much regulation, so much movement in the industry,” Ms Power said.

“Say what you want for some of that stuff from a conduct perspective, but what the banks did, which was great, was bring new planners into the market and really solving that, for want of a better word, mass advice gap.”

She added that with this pathway now a thing of the past, it is unclear whether a meaningful number of new advisers can be recruited to the profession.

“They had capital and they’re investing in digital tools and investing in supporting the advice community. I think that was a really important part of this evolution,” Ms Power said.

“A number of those planners, a very material number of those planners are now in small boutiques or self-licensed or have gone over to other institutions, non-bank aligned institutions. So, they did play a very important role.

“Now, do I think they’ll step back in? I don’t know the answer to that, but I absolutely think that there is a place for bringing more advisers into the market and particularly for those advisers that can provide that scaled mass advice to Australians that have $200,000, for example.”

According to Ms Power, there are programs that are aiming to plug the gap and help new advisers join the industry, but that the Quality of Advice Review (QAR) reforms could also provide a way forward.

“We launched a program last year, which was called CFS Elevate, a people and culture platform to help people through their [professional year] and support advisers through that part of their accreditation,” she said.

“I think this is where that tier two of the QAR will really play a role in our sort of call centre. We have lots of people that we’re training, bringing up in terms of accreditation and arguably, we could accredit them as advisers, we could train them to become advisers and give them a pathway to do that. So, that second tier QAR step does actually open up that opportunity for super funds, specifically.”

Whether or not banks will be welcomed back into the fold post-QAR is still up in the air, with Financial Services Minister Stephen Jones telling ifa last week that he is not inclined to involve banks and insurers, despite the QAR’s push.

Namely, the QAR doesn’t differentiate between super funds, banks, and insurers, and instead suggests that all institutions should be given expanded advisory powers in order to plug the advice gap. But Mr Jones disagrees.

“There’s no doubt if you’re able to crack it in super funds we can create some models which might be applicable,” Mr Jones told ifa.

“But I’ve also been pretty pragmatic and I said to the life insurers, and to the banks, ‘Tell me what you want to do, that you can’t do’. Let’s try to solve real problems without having to go to the effort of setting up major regulatory overhauls, let’s look at what you want to do that you think you can’t.”

To hear more from Kelly Power, tune in here.