With the Government’s growing commitment to making financial advice more accessible and affordable for millions of Australians, GBST visited parliament to witness the Minister for Financial Services's presentation of the ‘Delivering Better Financial Outcomes' roadmap.
GBST discusses the key outcomes of this address, the future of Australia’s advice landscape, and the critical role of digital technology innovation in closing the financial advice gap.
During an exclusive invitation-only address at Parliament House in Canberra last week, the Hon Stephen Jones MP disclosed the specifics of the government’s response to the Quality of Advice Review (QAR) with their proposed reform package.
The announcement covered six big ticket items the industry has been anticipating.
- Modernised best interests, for all forms of advice including digital or intra fund advice where advice can:
- cover one or a few topics to meet a client’s needs and objectives; and
- be based on relevant information, rather than a comprehensive fact find.
- Technology-neutral, a ‘clear, concise, and effective’ ‘Advice Record’ which will replace a Statement of Advice (SoA). This will apply to financial advisers, superannuation funds, banks and life insurers. The Advice Record will include:
- Subject;
- Recommendations (basis for those recommendations); and
- Cost of the advice and disclosure of any benefits for the adviser.
- Superannuation fund’s ability to charge for retirement income advice from a member’s super fund on a list of topics including investment decisions (investment options within a fund and contribution strategies), retirement income (projections, drawdown strategies, and product recommendations), and the consideration of broader personal circumstances (debt, assets, and partner situation). The eligible list is yet to be provided by the government.
- Retirement Income Covenant (RIC) with funds to have more certainty around how they meet their obligations.
- General advice allowing superannuation funds to provide basic information and ‘nudges’ with the intention to encourage members to think about their financial situations.
- Introduction of a new class of adviser to advise on less complex matters to be titled ‘qualified advisers’ – who will require a diploma. This new class is distinguished from ‘professional’ advisers, i.e. those who charge a fee for service and meet the current educational and ethics standards for financial planners.
Following the address, a meeting was undertaken to engage in discussions with the Ministers Office. The focus extended to a broader exploration of the technology sectors’ role in delivering digitised advice solutions for superannuation members.
In the discussion, the Minister cited that “digital advice technology will be an enabler to providing financial advice at scale,” and reiterated that with only 16,000 advisers and five million retiring Australians – the numbers do not exactly work. “Technology will play a pivotal role for funds.”
A comprehensive discussion on the key challenges, consumer trends and technological landscape was also covered.
In particular, the Minister’s office emphasised digital advice as “a solution” for delivering advice at scale through superannuation funds and other channels, signifying its importance in the enablement of members gaining access to retirement advice, in alignment with the Treasurer’s retirement consultation released last Monday.
It was recognised that defaulting members into retirement products may not be a favourable outcome for many consumers, and that digital advice is identified as a key ‘lead-in’ for these products.
Consumer advocates also trend toward favouring digital solutions that can offer a clear record of the advice they are seeking, in contrast to dealing solely with a human, which was seen to be less trusted by consumer advocates.
The Government plans to develop a ‘black-and whitelist on certainty’, outlining specific advice topics that funds will be able to provide. This legislative framework will remain technology neutral, with no specific policies for digital advice.
The discussion highlighted that hybrid advice will also play an equally important role for members, where they are able to speak with a human adviser throughout any stage of their advice journey, should they choose. Digital tools are still expected to drive and enhance hybrid advice efficiently and effectively.
Also addressed were the impediments posed by the current legislative framework, which have acted as a barrier for super funds in the provision of quality advice to their members. It was noted that the proposed framework can allow for both the technological innovation that exists today around digital advice to be more broadly adopted by super funds, due to greater clarity of advice guidelines – and importantly aid toward solving Australia’s advice gap.
The role digital advice plays in a member’s retirement is vital in the sense of better guidance, education, and topical advice, however, in parallel, digital advice can support well-thought-out income products for members approaching and maintaining their retirement.
It will be important for super funds to develop a robust digital engagement and advice strategy that supports a better member experience for the purpose of retaining members. The governments proposed framework will see the opening of new channels and entrants in the provision of digitised advice services and retirement products for Australians.
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Posted in: Advice solutions
