While more members of the wider life insurance industry have generally welcomed the Government’s announcement on tranche two of its Delivering Better Financial Outcomes package, they are eager to see more detail in several specific areas.
Competitively Neutral
CEO of the Financial Services Council Blake Briggs says Assistant Treasurer Stephen Jones has committed to financial advice reforms “…that are competitively neutral, to ensure that all sectors in the financial services industry contribute to the common policy goal of delivering affordable and accessible financial advice …” (Also see: Industry Groups Welcome Reforms.)
Briggs says the Government’s “…direction of travel is positive however with critical details yet to be confirmed, industry support is qualified. …confirmation that the Best Interest Duty will be modernised, the safe harbour steps abolished and statements of advice will be reformed have broad industry support.”
…FSC modelling has shown that financial advice reform will reduce the cost of providing advice by 40%…
He notes that regulation has increased the cost of financial advice to over $5,000 but “…FSC modelling has shown that financial advice reform will reduce the cost of providing advice by 40%.”
Briggs says the FSC also welcomes the Government’s “…commitment to a competitively neutral model for the new class of adviser in particular, demonstrated by expanding who can employ NCAs and allowing advice providers to charge a fee for service, rather than exclusively a ‘collective charging’ model.”
A Critical Detail for Further Consideration
He adds 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.”
“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.”
…We know from our own data that it currently takes up to 20 hours to generate advice per client, and these measures will create efficiencies…
Insignia Financial says the proposed measures, such as replacing SoAs and removing safe harbour steps from the modernised Best Interests Duty, will reduce regulatory red tape and better enable scaled advice.
“We know from our own data that it currently takes up to 20 hours to generate advice per client, and these measures will create efficiencies and allow advisers to dedicate more time to serving clients.”
The firm is also pleased to see the framework for the New Class of Adviser is “competitively neutral”.
“The introduction of NCAs … will assist more Australians to better plan for retirement. We are pleased the Government is allowing trustees discretion regarding which services they charge a fee for, so they can meet their best financial interests obligations, while also enabling independent advice businesses to employ NCAs.”
Insignia says it’s “…eager to see more detail on the proposed list of prohibited topics to ensure consumers receive appropriate advice…”
Meanwhile, insurers MLC Life Insurance and TAL welcomed the advice reforms with TAL describing it as a win for Australians.
TAL Group Chief Executive and MD Fiona Macgregor says TAL is a strong supporter of quality financial advice and that the reforms would make it easier for Australians to access help.
“Today’s announcement is a win for Australians. These reforms are critical to making financial advice more affordable and accessible,” she says.
MLC Life Insurance welcomed the reforms including those to modernise the Best Interests Duty, replace SoAs and introduce a new class of advisers.
Kent Griffin, CEO of MLC Life Insurance, also welcomed reforms “…to clarify the rules and empower superannuation funds to proactively engage customers and clarify the scope of advice they can provide, ultimately supporting the range of information and advice options available to them.”
…these measures demonstrate that simplifying regulations and maintaining strong consumer protections are not mutually exclusive…
He says these measures “…demonstrate that simplifying regulations and maintaining strong consumer protections are not mutually exclusive. Together they will provide the industry with the clarity needed to innovate while giving customers greater confidence in securing their financial futures.”
Aware Super CEO Deanne Stewart says the new adviser model is an important part of financial advice reforms.
“Making financial advice more accessible and affordable is critical to meeting the growing need for retirement advice, with more than 300,000 Australians expected to retire each year over the next five years.”
She says that introducing a new class of adviser “…backed by a strong consumer protection framework, will unlock the ability for superannuation funds and other providers to deliver the help and guidance Australians need to confidently navigate their retirement.”
