AustralianSuper calls for simpler rules on financial advice

AustralianSuper says the federal government should simplify rules around providing financial advice as it gears up to cater for a wave of members retiring.

Current regulations – which place strict rules around the provision of advice – have seen thousands of financial advisers leave the industry, pushing up the cost of advice, taking it out of the price range of many ordinary retirees.

AustralianSuper says the federal government should simplify rules around providing financial advice as it gears up to cater for a wave of members retiring.

The country’s largest superannuation fund is expecting 30,000 of its 2.7 million members to retire over the next year and 670,000 to retire over the next 15 years.

In a submission to the government’s quality of advice review, the fund argues for streamlined regulation that could include ­allowing it to give more general advice to members approaching retirement and more use of digital platforms to provide basic pre-­retirement advice.

Current regulations – which place strict rules around the provision of advice – have seen thousands of financial advisers leave the industry, pushing up the cost of advice, taking it out of the price range of many ordinary retirees. AustralianSuper says that there has been a 75 per cent increase in demand over the past two years by members who are being advised by external advisers. But it argues that there is an opportunity for a broader provision of advice to more members if the regulations can be streamlined.

“Quality financial advice can make a material positive difference to the lives of Australians,” the submission reads.

“There is significant demand from consumers across all parts of the help and advice spectrum which is increasing. There are opportunities through regulatory and legislative reform to improve affordability and accessibility without compromising quality and consumer production.”

The submission notes that legal action taken by the Australian Securities & Investments Commission against Westpac and BT has made funds more cautious about providing advice to members. “This has created ambiguity and led superannuation funds to be more cautious over what can be done with member interactions that are not intended to be personal advice,” it reads.

AustralianSuper argues that it should be freer to provide general advice to members approaching retirement, including the pension payments they may be able to receive from the government and how to structure drawdowns from their super, without having to charge them the cost of an individualised consultation, which can run into thousands of dollars.

Personalised advice for members can cost $2700-$3000 each. “The provision of ­advice on these topics (through more generalised advice) would allow AustralianSuper and other superannuation funds to better prepare members more directly for retirement, on a larger scale,” its submission reads, arguing the degree of regulation should be more commensurate with the risk and potential for consumer detriment.

At the moment, the fund argues, when it comes to providing personal advice, “the compliance focus tends to overshadow the advice process and add cost”.

“Compliance teams that oversee advisers have become more conservative over time,” it says.

“Compliance audits are heavily focused on meeting a large list of requirements that result in a ‘pass’ or ‘fail’, with little focus on the quality of advice that was received by the consumer.”

The government review comes amid concern about the number of advisers leaving the industry due to stricter qualification requirements and regulations that have forced up costs, taking it out of the financial range of many just as the wave of baby boomers is hitting retirement age.

Rainmaker, a finance research firm, estimates that 3000 advisers left the industry last year.

AustralianSuper also argues for a more streamlined approach to the provision of advice by digital platforms, a move that is widely seen as critical given the need for basic advice by the increasing wave of super fund members moving into retirement.

“Digital advice has long been seen as a way to support more ­affordable and accessible advice,” the submission reads. “Despite this, there is an absence of highly developed solutions in the Australian market that cater for the needs of advice providers and consumers, while working in the legal framework.”

The submission argues that there needs to be clarification that the cost of any financial advice provided to members can be deducted from their super accounts.

AustralianSuper has a network of about 2800 external advisers.

It also has 17 internally employed financial planners who provided members with 814 instances of personal advice and 1120 instances of face-to-face general advice last financial year.

Another phone-based channel provided 6475 instances of personal advice and 4315 instances of general advice in the last financial year. The fund argues that there is a large amount of basic financial information that can be provided to members on an affordable basis if it can be done at scale.

“As complexity rises, so does cost and we see fewer members accessing and receiving quality help and advice,” the AustralianSuper submission reads.

The quality of advice review – which is being led by Allens partner and superannuation and financial services law expert Michelle Levy – will report to the government by December 16.