Super industry says ‘robust consumer protections’ key for NCAs

In a statement late Tuesday night, Financial Services Minister Stephen Jones provided clarification on tranche two of the Delivering Better Financial Outcomes (DBFO) reforms, particularly regarding the operating framework for the new class of advisers (NCA), which has been met with varying levels of enthusiasm across the advice industry.

Notably, the statement said that licensees “will now have the option of charging a direct fee for advice provided by the new class of advisers”. This has been a welcome change given the minister’s December 2023 announcement had said this would be prohibited, leading to 12 months of heated debate within the industry.

Several parties, such as the Financial Services Council (FSC) have voiced their support for the proposed changes and the government’s commitment to a “competitively neutral model” for the NCAs.

“The FSC has argued that a competitively neutral NCA framework will support an increased supply of advice for Australians, particularly by businesses with a specialisation and experience in providing independent financial advice to consumers,” FSC chief executive Blake Briggs said.

Although the minister’s statement provided some clarification on the scope of advice NCAs will be authorised to provide, the superannuation industry has stressed the importance of protecting consumers by not putting them at risk of receiving inappropriate advice.

Furthermore, while several relevant parties have made mention of working with the government in some capacity, the FSC was the only group that said it would be helping the government “define suitable topics for scoped advice provided by the NCA”.

“The design of the proposed list of prohibited topics for NCAs, and ensuring they are limited to simple advice topics that distinguishes them from professional financial advisers, is a critical detail for further consultation,” the FSC said.

Briggs added: “Allowing independent financial advice businesses to offer advice on simple topics through the new class of adviser and providing the flexibility to charge one-off fees for this advice, in addition to collective charging which some superannuation funds may adopt, supports competitive neutrality and choice for consumers.”

The Association of Superannuation Funds of Australia (ASFA) shared its support for restricting the NCA to providing advice on prudentially regulated products, as well as the exclusion of certain high-risk products, ensuring that consumer protections are a “core pillar” of expanding Australia’s access to financial advice.

“ASFA is pleased to see that creation of the new class of advisers is accompanied by strong regulations and consumer protections to ensure high standards are maintained, alongside the increased provision of high-quality financial advice,” ASFA CEO Mary Delahunty said.

“These reforms are a clear signal of the government’s commitment to delivering better outcomes for Australians by addressing barriers to affordable financial advice.”

Similarly, the Super Members Council (SMC) voiced its pleasure at the strong consumer protections evident regarding the NCA alongside the government’s efforts to expand access to advice.

SMC CEO Misha Schubert argued that these changes will support Australians by helping bridge the affordable advice gap.

“Most super fund members just want simple information to be able to calculate their total retirement income for them and their family. This package of reforms will enable that urgent need to be met,” Schubert said.

“We’ll examine the legislation closely to ensure strong protections for consumers. We look forward to working with government, Parliament and all key stakeholders to pass these crucial reforms.”

Noting the change allowing licensees to charge a one-off fee for NCA services, SMC said: “This charging ability must be accompanied by robust consumer protections.”

What did super funds have to say?

Meanwhile, Australian Retirement Trust (ART) chief member experience officer Simonne Burnett said that ART has already embedded “robust internal processes to prevent consumer harm in the process of providing advice”.

“We believe consumer protection is paramount, and we welcome the government’s commitment to putting the needs of consumers first,” Burnett said.

“We thank Minister Jones and the government for working cooperatively with all parts of the financial services industry and we look forward to continuing to work closely with government on the drafting of supporting legislation.”

Highlighting the strong demand for advice, Rest CEO Vicki Doyle explained that the fund’s members utilised its digital advice tools more than 30,000 times in the last financial year, with more than half of the interactions by members under the age of 40.

With so many in need of financial advice, but unable to access it largely due to the high cost, Doyle said “these reforms support the growth of digital advice and will help meet the growing demand for people wanting access to simple and accessible advice”.

Doyle added: “Without financial advice from their super fund, many of our members wouldn’t be able to get advice at all.”

Noting the new financial operating model for NCAs, Doyle said this will “support a super system that is fairer and more equitable for everyone”.

“It will allow us the opportunity to substantially expand our financial advice and make advice accessible to even more of our members. This includes the ability to more deeply engage our members at key decision points and life stages through personalised ‘nudges’,” she said.

Taking a slightly different focus, Vanguard managing director Daniel Shrimski noted the important role of “personalised, professional financial advice” in helping Australians navigate their retirement planning.

“Advisers are best placed to deliver comprehensive personal advice that considers the full information of households to help retirees to optimise their retirement income,” Shrimski said.

“With this announcement, we hope that a more modernised best interest duty and the removal of safe harbour steps will help lighten the load for advice practices so they can support more Australians to navigate their retirement journey.

“As a result, Australians need more access to guidance and information to close this advice gap. Ideally, this should come from trusted, highly regulated institutions to help Australians achieve greater financial security and retirement confidence.”

Similarly, CFS Superannuation CEO Kelly Power stressed the need for a more expansive advice industry to support the needs of Australians without compromising professional advice businesses.

“This announcement is a key step to making financial advice more accessible. We support the need to maintain the distinction between professional advisers and the new class of advisers, and look forward to the next phase of consultation,” Power said.

“We are also pleased to see that the government has indicated that newly qualified advisers can be employed by licensees. This will enable more people to get the help they need and look to the future with confidence.

“Our research has consistently validated the significant consumer benefits of receiving financial advice, which is why we support a growing and vibrant professional advice sector now and into the future.”