The government made a stunning announcement on the morning of what was supposed to have been a relaxing public holiday.
A raft of product payments that had long been paid to advisers will now be banned under a new reform regime, the government’s super man Chris Bowen announced on that day.
In other words, the link between sales and advice will be cut.
Media statements were soon fired off from home offices around the country, and while there was broad support for the reforms, many in the industry returned to work on Tuesday knowing the sector will be changed forever.
The advice industry, traditionally grown from insurance sales people, will no longer have the life support of trail commissions. Furthermore, advisers will also have to comply with a fiduciary duty stating that planners must always act in the best interests of their clients.
The industry’s deep-seated mindset of commissions and volumes sales will be transformed as the sector grapples with the move to a fee-for-service model.
Rice Warner is already predicting a fall in the number of advisers offering full-service advice. Interestingly, however, the actuarial research firm points to a growth in advisers providing targeted advice.
While the advice industry is in for a shakeout, opportunities remain and advice is an area that could thrive within superannuation in both the industry and retail sectors.
The expansion of intra-fund advice under the new reforms will allow super funds to provide advice on transition to retirement, intra-pension advice, superannuation and Centrelink payments.
Single issue advice could also mean new ways to deliver advice such as online services – something super funds are well placed to do.
No one is of course certain how the sector will play out over the next number of years. However, more people will hopefully be able to access simple and affordable advice without the product sales sting.
