The proposal to create a new class of financial adviser, currently termed qualified adviser, which can provide simple personal advice with no fee to consumers, means it is important to have a clear definition of what is meant by ‘simple’, according to the FAAA.
In a wide-ranging speech at a private event FAAA CEO Sarah Abood, addressed the Government proposal around qualified advisers, noting that having a clear definition of what is meant by simple is for the protection of consumers, but also the qualified advisers and their employers (see: FAAA Deeply Concerned on Latest Advice Reforms).
While the association is still consulting with its members in this area, Abood says at present it’s considering three broad ways in which the complexity of advice could be categorised:
- One option could be to develop a standardised list of financial planning strategies “…not unlike the current pharmaceutical scheduling regime. Perhaps our equivalent of paracetamol bought from a supermarket, could be advice on the government co-contribution to super. Whereas a schedule 8 drug, requiring a prescription from a GP, could perhaps be equivalent to something like establishing a transition to retirement strategy, that would require a fully qualified professional adviser.”
- Another way advice could be categorised “…is based on the circumstances of the consumer. For example, in the retirement planning space, a client who will be eligible for the full age pension will likely have simpler needs than one who will be a part-pensioner, so perhaps a limit could be set equal to the age pension income and asset tests, to mark the line between simple and complex advice.”
- A third option “…might be to allow QAs to advise on existing financial products, but not to establish new products.”
In looking further at the proposal Abood noted “the firestorm” in the sector, around the name qualified adviser.
She was grateful “…to the Minister for his assurance that “qualified” was intended in the sense of caveated, or restricted, rather than in the sense of having qualifications.”
…We are very pleased that the term is not set in stone, and that alternatives will be considered during the next phase of consultation…
“ We are very pleased that the term is not set in stone, and that alternatives will be considered during the next phase of consultation,” she said.
Levels of Education
Another matter of detail that remains to be resolved with the proposal is the education that qualified advisers would need to have completed.
Abood says the FAAA thinks it’s important that minimum levels of required education be set that are commensurate with the types of advice that this adviser class will provide.
“This is critically important to ensure these people can give clients advice that will be in their best interests. It’s also an important assurance for their employers, who will have the duty to ensure this advice that is given, is in the best interests of the clients who receive it.”
…the education should fit into the current financial advice ecosystem that is already established…
The FAAA suggests that the education should fit into the current financial advice ecosystem that is already established.
“If a QA completed, say, a diploma in superannuation, they may well wish to continue their studies to become a fully qualified adviser over time. How sensible if that diploma counts fully towards their Bachelor of Financial Planning degree, reducing the time they would take to be able to give full professional advice.”
Abood says these advisers “…could play a substantial and positive role in rebuilding the numbers of professional financial advisers.”