Government move allows for new generation of financial advisers

The government has paved the way for super funds, banks, and life and ­insurance companies to move into the financial advice business.

Minister for financial services Stephen Jones. Picture: NCA NewsWire / Gary Ramage

The federal government has paved the way for super funds, banks, and life and general ­insurance companies to move into the financial advice business, with a new generation of restricted ­financial advisers.

Financial Services, Minister Stephen Jones will, in a speech on Thursday morning, outline plans for a new category of “qualified advisers”, who will be able to provide simple financial advice.

The advisers will be employees of licensed financial institutions, which will be responsible for the advice of their staffers, who will not be paid any fees or commissions for their work.

The government is hoping that the new pool of “qualified advisers” will help fill the advice gap as an estimated five million Australians are either at or headed towards retirement, and only 16,000 licensed financial advisers remain.

The proposed changes, which are being introduced as part of the government’s response to the Quality of Advice review, will also scrap the need for professional ­advisers to provide expensive complex statements of advice to clients, allowing them to provide simpler advice on specific situations.

They will also make it much easier for super funds to charge for financial advice, including taking into account the broader circumstances of their household, and to “nudge” members to think more about their financial situation.

Announcing the proposals, Mr Jones will outline his vision for a “new class of financial advisers who will fill the advice gap by advising on less complex matters”.

He will say the new class would “generally” be employees of financial institutions including banks and super funds and would “focus on providing simple financial advice”.

“Advisers will be prohibited from charging a fee and from receiving a commission, which will help to restrict their advice to simple advice,” he will say.

The moves are expected to see the super fund sector move into the financial advice area, as an increasing number of its members approach retirement.

While this had been expected, the Minister surprised some by ­allowing banks and life insurance and general insurance companies to also employ “qualified advisers” on the same basis.

Qualified financial advisers will have to meet minimum education standards, but ones less ­onerous than those required of professional advisers.

The idea of a new category of qualified financial advisers who could provide simple advice was one of the recommendations in the Quality of Advice Review delivered to the government late last year by Michelle Levy, a partner in law firm, Allens.

But Mr Jones will say the government will introduce “important safeguards” to the proposed system that “support quality, while maintaining affordability.”

The Levy review, commissioned by the Morrison government, was criticised by some consumer groups for its recommendations which they warned would ease the rules around the provision of financial advice, potentially paving the way for another royal commission into the financial services sector. But Mr Jones has long acknowledged that the current laws around the provision of financial advice are too strict and have seen the departure of thousands of ­financial advisers from the market in recent years and pushed up the cost of advice at a time when millions of Australians are needing it.

Australians now have an average $200,000 in their superannuation accounts, with many approaching retirement with much larger sums.

“When Australians cannot access the advice and information that they need and want, this is a failure of the system,” Mr Jones will say.

He will argue the changes do not mean the government is going to “reverse course and return to the bad days”.

“If the goal has been to protect Australians from bad advice, we have been pretty successful,” he will say. “But in the process of protecting Australians from bad advice, we have also protected them from good advice.”

Mr Jones’ speech makes it clear that the government is expecting the super fund sector to step up its involvement in providing advice.

The country’s two largest funds, AustralianSuper and Australian Retirement Trust, made a combined submission to the government this year pushing for more scope to provide advice to their members.