FAAA suggests 3 approaches to defining simplicity in ‘simple advice’

Advisers remain concerned about the government’s plan to allow superannuation funds, banks, and institutions to expand their advisory powers via a new class of financial advisers – “qualified adviser”.

While concerns regarding these impending changes are multiple, one area that brings particular unease to professional advisers is the idea of “simple advice”, it’s definition, and how it will be policed.

Speaking at an event held by PritchittBland Communications on Wednesday, the Financial Advice Association Australia (FAAA) chief executive officer, Sarah Abood, said that while the group doesn’t have a definitive answer “yet”, it is consulting with its members and has arrived at three potential ways to define “simple advice”.

Under the first option, Ms Abood suggested developing a standardised list of financial planning strategies, not unlike the current pharmaceutical scheduling regime.

“Perhaps our equivalent of paracetamol bought from a supermarket could be advice on the government co-contribution to super,” said Ms Abood.

“Whereas a schedule 8 drug, requiring a prescription from a GP, could perhaps be equivalent to something like establishing a transition to retirement strategy, that would require a fully qualified professional adviser.”

Option two would see advice categorised, based on the circumstances of the consumer.

“For example, in the retirement planning space, a client who will be eligible for the full-age pension will likely have simpler needs than one who will be a part-pensioner, so perhaps a limit could be set equal to the age pension income and asset tests, to mark the line between simple and complex advice,” the CEO said.

Option three involves allowing qualified advisers to advise on existing financial products only.

“Perhaps a qualified adviser could advice on an existing financial product already held by the client, but not establish a new one,” Ms Abood said.

She stressed that these options are currently being discussed with members, and that the FAAA has yet to reach a position.

Ms Abood also shared that the Minister for Financial Services Stephen Jones has assured the FAAA that the term “qualified adviser” is not set in stone and will be consulted on as part of the upcoming phase of consultations.

Ultimately, she said: “We all await with great anticipation the next steps of consultation on QAR.”

“The government’s final response on 7 December wasn’t long – four pages, with quite a lot of white space, quite the opposite to what we are accustomed to in terms of length. Questions remain and we are all eager to engage, to ensure these important reforms can achieve their goals,” said Ms Abood.

“And after all the effort that has gone into these, we are all very keen, I think, to see the reforms come to life in the current term of this government.”