September 30, 2019
Our latest poll is effectively asking you whether life insurance advice should be treated as a special case when it comes to minimum adviser education standards.
This is a question which does not have a right or a wrong answer. It’s more a question of who you are and what you think. It’s a conscience vote.
The prevailing (and mandated) approach to regaining trust in financial advice is manifested in FASEA’s adviser exam and in its minimum education standards, which must be successfully completed by all advisers by 1 January 2026, if the Government’s amendments are passed by the Senate (see: FASEA Extensions Confirmed).
There are compelling arguments – for compelling reasons – that can be made in support of an industry structure that will require every adviser on the ASIC register to undertake the same examination and to attain the same minimum education standards, irrespective of the nature of their advice proposition.
In an ideal world, no-one would contest this proposition. It makes so much sense, especially as it relates to restoring customer faith.
In the real world, however, many in the financial services community offer an alternative perspective. That perspective is based around a pragmatism which contends that stand-alone life insurance advice is indeed a different proposition.
The idea is that a different set of minimum education metrics should apply when it comes to delivering life insurance advice solutions – for risk specialists – but that if they seek to provide advice across a broader spectrum, they would be required to meet the currently-mandated FASEA standards.
A significant focus of this debate revolves around the notion of how advisers add value for their clients. When it comes to investment and superannuation advice, it’s entirely appropriate to argue that the quality of that advice should not be dependent on the rise and fall of the value of a client’s investment portfolio. It has more to do with the best advice (and wisdom) an adviser can deliver to their clients, given the individual adviser has little control over the vagaries of the stock markets.
…there’s a proviso …which presumes the consumer is prepared to pay the equivalent fee for life insurance advice as they are for their investment and superannuation advice
Does this ‘ideal’ logic also apply when it comes to life insurance advice? Yes, it does. But there’s a proviso applied to that logic, which presumes the consumer is prepared to pay the equivalent fee for life insurance advice as they are for their investment and superannuation advice. But they are not – and therein lies the crux of this issue.
The Government and FASEA’s position that every adviser – regardless of the nature of their advice proposition – should be treated the same, is both admirable and naive. It’s naive because they’ve not taken into account the fact that the consumer – who is the intended beneficiary of these reforms – does NOT value life insurance advice in the same way as they value investment and super advice.
Unintended consequences: will the current FASEA exam and minimum education standards spell the end for most risk-specialist advice businesses? And will less Australians (including many ‘mums and dads’ families who need it most) have access to quality life insurance advice/wisdom as a result?
Perhaps consumer attitudes towards the relative value of life insurance advice will evolve over time, when compared with how they perceive the value of their investment and superannuation advice. But the Australian community just hasn’t arrived there yet – and that’s the argument that supports the contention that minimum education standards for risk advice, at least for now, should be given the respect of individual consideration.
As usual, there’s a more nuanced conversation that exists beyond the blunt question we’re asking. But for the time being, we’ll hand the debate over to you and will report back next week…