Labelling what qualifies as factual information as opposed to general and full-scope advice is one measure that will help scaled advice models operate successfully, according to the FPA’s chief professional officer.
Deen Sanders shared his concerns for the Future of Financial Advice (FOFA) measure as part of a panel discussion during ASIC’s two-day conference in Sydney.
Consumers do not know the difference between factual information, general advice and full-scope holistic advice, Sanders said.
“We actually think scaled advice can work, but the difficultly is about the truth in labelling. The consumer needs to know what they’re getting,” he said.
“Our greatest fear, and this is the consequence we live with today, is that the word ‘advice’ is intended to cover this entire thing. As an industry we actually have spectrumal differences of what advice means.”
Industry Super Network chief executive David Whiteley said the group’s call centres received a 26 per cent increase in phone enquiries over a short period of time during one market collapse.
“People need a whole range of different responses to that,” Whiteley said.
“Some people just needed quite simple, educational reassurance, some people required more general advice, other people needed personal advice and other people were provided much more complex advice, which they then had to pay for.”
He said 80 per cent of intra-fund advice was general advice or in the form of education, information and reassurance.
“In effect, it’s working as a triage service. These are people who are required to save 9 per cent of their wages, phoning up the place where their money’s being invested and asking often very, very simple questions,” he said.
ASIC senior executive leader of strategy and policy John Price said the corporate regulator released a consultation paper on scaled advice towards the middle of last year to address how the process might work.
“We provided a number of examples of how discussions with clients might occur and we were being clear in each of those [whether] what was being provided was factual information, general advice or personal advice,” Price said.
“In each case, the adviser says ‘I’m providing you factual information’, so it is pretty much in Deen’s truth to labelling.”
Sanders said communicating the fundamental distinction between comprehensive advice and the concept of immediate-need advice would result in the evolution of various advice models.
“The model of advice that David was speaking to is absolutely vital and it’s unquestionable that people need short, sharp, immediate answers to questions,” he said.
“But I’m concerned that when we get to the idea of scalable or, more accurately, immediate, direct, single-solution advice that clients won’t know that there might be better options for them if they want to have a deeper relationship.”
