Abood warns there’s ‘danger’ of confusion around advice level

Speaking on Ausbiz last week, Financial Advice Association Australia (FAAA) chief executive Sarah Abood said that while super funds providing simple advice through a new class of advisers could help serve the “missing middle”, clients may not be aware that they are not receiving comprehensive advice.

“We want consumers to know that [comprehensive advice] is available and that's the best quality advice you can receive,” Abood said.

“It's tailored to your goals and objectives as well as your own situation. Now, for some people, it might be that all they want is a bit of simple information about the fund that they're in. And that's fine. There are no problems with that.

“I think the danger comes if people think that they're getting comprehensive advice and what they’re getting is just this very limited service. Comprehensive advice is intensive, there's no getting away from it, but it's also a service that is tailored to you, and we believe will give you a much better outcome than just that single purpose advice.”

She acknowledged that there are a lot of consumers that are struggling to actually access advice due to the much lower number of financial advisers remaining in the profession, but “people need a bit more than just what investment options do I have available to me”.

“It's being referred to as the missing middle, and that's the vast majority of Australians that have a need for a bit of help, and that is not available at the moment. So this new set of legislation that we hope to see soon is called Delivering Better Financial Outcomes, tranche two, and we're hoping to see that legislation coming through soon, and that will add another type of advice to the equation.

“We're hoping that it doesn't confuse people further, because there is a need to serve people that currently don't have access to advice, but we've got to make sure that people understand what they're getting.”

Last week, Chant West general manager Ian Fryer argued that this “missing middle” should be getting more help from their super funds regarding their pre- and post-retirement planning.

“Super funds need to do more to assist members in transitioning from the accumulation phase to the decumulation phase. People need to understand how much they can draw down in retirement and how they should be invested,” Fryer said.

Given that the optimal outcome will depend on each member’s situation, they need tailored financial advice.

“Indeed, the best way to deal with retirement planning is through financial advice. To get tailored advice, it might cost about $5,000. But many super fund members would not want to or be unable to pay this much,” he said.

While Fryer suggested that digital advice could be the key to super funds providing more retirees with personalised financial advice, Abood said the key element is Australians understanding the different “flavours of advice” available and making sure they can tell the difference.

“I think it's hard for consumers sometimes to distinguish what are the different kinds of advice I'm getting? What are they costing me, and is this what I need?” she said.

“So, for us, it's really all about trying to explain that there are forms of advice, from no advice to general advice, intra fund advice, comprehensive advice, and potentially soon a new class of advice. And I think consumers need to understand what those different kinds of advice are and how they can potentially benefit.”