Retirement advice complexity = cost | Australian Markets

ANALYSIS

The intersection between intra-fund advice, the retirement income covenant and the new class of financial adviser was at all times going to be essentially the most contentious space of the Government’s Delivering Better Financial Outcomes laws.

The financial advice occupation has by no means been significantly comfy with the idea of intra-fund advice as a result of of situations the place advisers have perceived superannuation funds have pushed the sting of regulatory envelope, significantly on points corresponding to transition to retirement.

Thus, the Financial Advice Association of Australia (FAAA) is completely justified in in search of to determine some boundaries round retirement planning advice as half of its broader lobbying efforts across the successive tranches of the DBFO laws.

Reading the publicity draft of the second tranche of the DBFO laws and listening to the related ministerial rhetoric there will be no doubting that Government’s agenda is to, as anticipated, ship more accessible and reasonably priced financial advice by way of superannuation funds.

The use of superannuation as a supply mechanism was central to Michelle Levy’s Quality of Advice Review and it has been central to broader coverage considering over a long period of time.

Indeed, when taken along with the obligations imposed on superannuation funds by way of the Retirement Income Covenant it’s clear that the boundaries between easy and complicated advice are prone to be examined and inevitably blurred.

The FAAA is arguing that retirement planning advice “will always be complex and costly” and will subsequently not be supplied on a collectively charged foundation – in different phrases, it must be the area of totally certified financial advisers.

It has additionally argued for limits on superannuation funds “nudging” members to get advice, significantly retirement planning advice.

In doing so, the FAAA has gone to the core of the difficulty by in search of to outline the distinction between easy or advanced advice, arguing that straightforward advice will usually be single situation and sometimes about simple and low-risk financial merchandise.

“In our view, retirement planning advice is always going to be complex. It involves many different aspects of advice and the client’s circumstances, often complex products, a long time horizon, numerous interdependencies, multiple risks, with high levels of expertise required to deliver it,” the FAAA’s submission to Treasury says.

What it doesn’t say, however what must be apparent, is that the very complexity of retirement planning advice makes it costly and subsequently, within the view of the FAAA, inappropriate for being collectively charged within superannuation fund.

The problem for the FAAA in sustaining this argument might be to search out superannuation funds, centered on different priorities, able to agree with them.