With the second tranche of the Delivering Better Financial Outcomes bill set to introduce a new class of adviser, an advice executive thinks the UK model could be a viable alternative.
On the latest episode of the ifa Show, experienced financial services executive Tony Beaven explained why Australia should not introduce the new class of advisers, and instead follow the UK’s example for delivering limited advice.
While the Council of Australian Life Insurers (CALI) suggested that the new class of advisers should only be required to hold an AQF4 level qualification, Beaven argued that advisers working in financial institutions should still be fully qualified professionals, despite the calls for lower education requirements from some in the wider industry.
“In the UK, limited advice is limited advice. It's there, available, and not a problem from that side. And I think we almost become complex in Australia. We're overcomplicating this in a sense, because when you look at limited advice, the qualifications, just to confirm this, you’ve still got to have your level four diploma in financial planning, the new diploma in the UK. It doesn't matter whether you give limited advice or not,” Beaven said.
“So you shouldn't change the benchmark and qualifications for somebody that's going to give risk advice, specific superannuation advice. They still have got to have that base level of qualification and that, please God, shouldn't change.
Having held a number of senior roles in the financial advice sector across Australia and the UK, Beaven believes there is no issue with having advisers working in institutions, as they do in the UK, as long as the necessary steps are taken to inform clients of the restrictions of their service.
“They put on their business card that I'm a restricted adviser of ABC and they also put this in their statement of advice and they make sure the client is aware of this. Then if you're independent, you can put independent from that side and then the client is fully aware of this,” he said.
“So the disclosure and the disclaimers, when you're then doing the advice you put in a statement of advice, ‘I'm specifically looking at superannuation today. These are the relevant disclaimers that I haven't gone into’.
“It's going to be quite interesting where they're going with this. I think somebody said it in one of the professional bodies – why don't we just follow the UK's example and save a lot of hassle? You could just tick the box and implement it tomorrow.”
‘Qualified adviser’ in the UK?
He explained that the UK has looked at ways to solve the advice gap as it struggles with the rising cost of service, however, when attempts were made to introduce a less qualified class of advisers, it was unsuccessful.
“The [Financial Conduct Authority] have looked at that. This is where the flow overs come in. So the FCA has started mooting some proposals of, everybody's got to look at this because it's only going to get worse, as obviously, advice fees will need to go up because it's a constant piece where if there's legislation, more regulation, more administration, then the advice fees will go up and it will increase the advice gap from that side of it,” Beaven said.
“It's something that's happening with consumer duty now in the UK, is they're starting to see the advice cap come in and it was mooted by the FCA in the UK saying there should be some sort of perhaps slightly lower qualification in the UK from that side.
“And I think at the moment it's been quashed, well and truly.”
Beaven said introducing a new class of advisers with lower qualification requirements goes against the efforts made in recent years to increase the professionalism of advice.
“Now what you're almost doing, in a sense, is saying, ‘Thanks guys, but what we'll do now, to do this, we'll do a slightly lower qualification’. That isn't going to help with the professionalism of the industry,” he said.
Finally, Beaven said advisers in financial institutions should still be fully qualified and required to clearly state the limitations of their services.
“My thoughts are, look at the advice process. Start looking at ways that you can build this through the limited advice process. Leave the qualifications as they are, but then have the disclosures, the restricted environment, the IFA environment, so then the companies that want to go down that route, as they are in the UK … SJP in the UK is, in a sense, a restricted advice company,” he said.
“They'll put those relevant disclosures on the business cards, the statements in advice and on their website as well. So why make things difficult when you could build the same model and all of a sudden you've got limited advice with the relevant disclosures and disclaimers, etc? You still maintain the quality of the advisers because they still have a minimum benchmark to adhere to.”
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