Not long ago, we discussed the “good advice” obligation and the expansion of personal advice as recommended in the final report for the Quality of Advice review.
Taken together, these recommendations would enable institutions like super funds, insurers and banks to provide advice to consumers at a theoretically lower cost than relevant providers (who, for brevity’s sake, represent the majority of advisers working today). QAR reviewer Michelle Levy explained that these institutions have a role to play in advice affordability given that “there are about 25 million Australians and there are too few financial advisers to provide financial advice to all who need it.”
While this has attracted criticism from some industry participants, Story Wealth Management CEO Anne Graham believes it’s just realistic. “I guess I’m just not a purist about it,” she says. “We need to be practical. Advice businesses like ours are already in the position of having to turn clients away; we have to be particular about the kind of clients we work with. It’s not a good business decision – for us or the client – if they can’t afford the service.”
She adds: “I think you need to take a step back and say that there’s surely a greater benefit all round if people can get some information from the source they trust and are familiar with.”
Regarding concerns that the proliferation of lower-cost advice options could further dilute consumers’ understanding of the value of professional financial advice, Graham says: “I think that’s already an issue even now. You hear people say, ‘I have all the information I need from my super fund. Why should I pay a financial planner?’ The important thing is just to make clear what you can and can’t get from your super fund.”
Ultimately, she says, “I think it would be pretty foolish of me to think, with how many of us there are, that we could possibly provide advice to everyone who needs it.”
Looking beyond the “good advice” question, Graham believes there are a lot of positives to come out of the report – including some that would have a material benefit for businesses like hers if they’re implemented quickly enough.
“One of the ‘quick wins’ I can think of would be the consolidation of fee disclosure,” she explains. “The requirements are so prescriptive and time-consuming right now, especially when you consider how different providers have different requirements in terms of information, whether one takes a digital signature or not and so on.”
She also points to optional SOAs as another opportunity: “It lets you give advice in a way that suits the customer and their business. A 25-year-old and a 65-year-old have different needs and preferences in terms of advice delivery.
“You still have to do the research and we still have to consider TMDs, but you can be more comfortable that you’re able to give advice in a way that’s suitable for you and the client.”
Taken as a whole, Graham sees these recommendations as increasing the possibilities available for established advice businesses. “You can take calculated risks – invest in a digital option, for example, and see how it goes, without as much worry about being non-compliant. As long as there’s a strong framework around all of this, it’s actually quite promising.”
