Insurers should invest in an adviser community, not ‘qualified advisers’

Ever since Financial Services Minister Stephen Jones announced the proposed introduction of a new class of advisers in December last year, speculation has run rife about exactly what level of education they would have and how limited the personal advice would be, particularly in the superannuation and life insurance space.

Speaking at a Senate economics legislation committee hearing in June, for instance, the CEO of the Council of Australian Life Insurers (CALI), Christine Cupitt, said insurers should be allowed to provide simple advice on their own products in order to bridge the advice gap.

“The Delivering Better Financial Outcomes and Other Measures Bill will help expand Australians’ access to advice and back-in the vital work of financial advisers across the country,” Cupitt said at the time.

“As cost-of-living pressures rise, many people are now less certain about their financial situation. They know they need to manage their household balance sheet, and getting professional advice on their life insurance is an important part of that. But this can cost more than $3,000.”

According to iExtend CEO David Sarkis, however, insurers would be better served spending the money they have earmarked for “qualified advisers” on investing in the financial advice community.

“Is that money well spent to build an infrastructure to provide general advice on your own product, or are the insurers better incentivised to use that to help advisers, build an adviser community?” Sarkis said on a recent ifa webcast.

“Certainly, that will be spread across a number of insurers but again, the idea is to grow the industry. So, I wonder what the right balance is there. Investing in the adviser community, help the training aspect and develop fully qualified advisers to be able to advise, give personal advice, to sell more insurance, I think is the way to go.

“But again, you need to find that balance.”

He stressed, however, that if the plan does go ahead, there needs to be a focus on understanding limiting the conflicts involved.

“There’s always been these conflicts where individual organisations are selling their own product, and that’s always been there. I think even from our perspective, you have to be really conscious of what sort of advice you’re giving and the limitation of that,” Sarkis said.

Also speaking on the ifa webcast, Lifespan Financial Planning CEO Eugene Ardino agreed that conflicts of interest need to be carefully managed.

“In principle, I don’t have an issue with having that level [of advice], because no matter how the new framework looks, there will be a large number of Australians who still won’t be able to access personal advice from a qualified adviser, there’s no way around that,” he said.

“So, I don’t mind having another level, but it’s just a question of making sure that the obvious conflicts that are there when you’re advising only on your own product needs to be managed.”

According to Ardino, the conflict involved in the system is “much more significant” than a financial adviser getting commissions when they have access to a “whole marketplace of insurance policies”.

“Here you’ve got an adviser that can only advise on the one policy that they’re perhaps incentivised, or even if it’s implicitly incentivised, to retain the client right. That’s a conflict, right? That’s significant for me, much more significant than the commission one,” he said.

“I’m OK with it conceptually, but I want to be careful that there’s some very clear lines as to what these people can and can’t say, and where their level of education is, because I do think they are going to fill an important gap of people that aren’t going to get advice. It’s better that they get advice here than going to Google, in a sense.”

PPS Mutual CEO Michael Pillemer added that there is a real concern over “confusion” between a professional adviser and a “qualified adviser”.

“I think one of the reasons why we’ve had the issues with the educational standards, one of the problems is that to be able to provide risk advice, you’ve got to be a fully-fledged financial planner nowadays. And I think we need to also try and see if we can line up the educational standards with some form of limited advice as well,” he said.