The financial advice reform package unveiled by the Albanese government on Thursday has been widely embraced by major players in the superannuation and insurance industries, who say that the move will allow millions more Australians to access quality advice.
Minister for Financial Services Stephen Jones has proposed to create a new class of financial advisers called “qualified advisers” who will generally be employees of licensed financial institutions, with the licensee assuming full responsibility for the advice provided.
AustralianSuper’s chief officer retirement, Shawn Blackmore, said the advice reforms announced by the government will prioritise the interests of super fund members.
In particular, Mr Blackmore said that changes to statement of advice (SOA) regulations will play a key role in allowing AustralianSuper to expand its financial guidance offering to its 3.3 million members.
“This is a big win for millions of Australians who will now receive the help and guidance they need to feel more confident about their financial future and that will allow them to have the confidence to move from savers to spenders in retirement,” he said.
“Superannuation funds are the right vehicle for these reforms as there is already very strong legislation governing fiduciary duty to ensure funds such as AustralianSuper act in the best financial interests of their members.”
Mr Blackmore also described the removal of barriers on the provision of digital advice as a “game changer” and said that modernising the best interests duty is a “major step forward”.
“Introducing a new category of financial adviser is a smart way of addressing an urgent need for straightforward advice that is going to grow exponentially in the next decade,” he added.
Aware Super chief executive officer Deanne Stewart said the reforms represent a “crucial extension” to the advice services super funds can currently offer their members.
“These important reforms enable us to significantly increase the scale at which we can provide safe, accessible, and high-quality financial advice to the 5 million Australians in or nearing retirement,” she said.
Ms Stewart said Aware was particularly pleased to see that “nudges” were recognised in the advice reforms. Namely, the government is set to allow funds to provide so-called “nudges” to members to drive greater engagement with super at key life stages.
“Nudges will be a cornerstone of digital advice solutions as Aware Super, and the wider superannuation industry, increasingly harnesses the power of data and generative AI to deliver smarter and increasingly sophisticated digital advice solutions to members,” she said.
The creation of a new category of advice providers, Ms Stewart said, will enable super funds to expand the advice they provide to members.
“There are many simple questions that we should be able to answer for members without having to make them book an advice appointment, so we can help more Australians to better understand, and better manage, their superannuation,” she continued.
“Making it easier to provide high-quality personalised help, at the time people need it, is crucial to increasing engagement with superannuation and helping all our members to achieve their best possible retirement.”
‘Missing middle’ plugged
UniSuper head of financial advice and education, Andrew Gregory, argued that for “too long” there has been a “missing middle” in advice where individuals without large super balances have been underserved by advice offerings.
“For many of these people who are stuck in the middle, simple questions turn into complex answers. It may not make sense for them to pay for comprehensive advice, but their needs are not served by general advice, and we want all our members to benefit from the right advice as they transition to retirement,” he said.
Mr Gregory indicated that UniSuper is doubling down on its advice offering “because we know advice works”.
“Eighty-five per cent of our members tell us they feel more confident in their retirement planning since receiving advice from us and, more importantly, 99 per cent say they intend to implement it,” he said.
“Superannuation funds are perfectly placed to provide this advice and the data is compelling: more advice means better retirements.”
UniSuper also stressed the need for tailored retirement solutions driven by sound advice, rather than resorting to defaults.
“Superannuation funds shouldn’t be let off the hook in their responsibility to members by allowing a default product system,” Mr Gregory said.
“Informed consent, agency, and choice – driven by investment in the right digital technology – must be the preferred option for all superannuation funds. We are more than ready and welcome the opportunity to provide more advice, and better advice.”
Meanwhile, Daniel Shrimski, the managing director of Vanguard Investments Australia, said the firm strongly believes that “no single product is going to suit everyone at retirement, nor solve for the complexity of retirement”.
“It is critical for more forms of advice services – from personalised information and guidance to digital solutions, to human advice – both from inside and outside the superannuation industry to be accessible to Australians at a younger stage of life to ensure retirement planning is not left too late.”
‘Clear role’ for insurers
AIA Australia CEO and Council of Australian Life Insurers (CALI) co-chair Damien Mu said insurers have a “clear role” to play in helping individuals understand if their cover continues to meet their needs as their lives change.
“Our ability to help people understand their protection needs and ensure their insurance is fit for purpose will be significantly improved under the government reforms, meeting an under-served need in the current environment,” he said.
Mr Mu said the new class of “qualified advisers” will be complementary to the critical services provided by professional and independent financial advisers.
“Professional financial advisers will continue to play an important role in supporting Australians with their holistic financial needs,” he stated.
“However, where someone has a straightforward and targeted issue about life insurance, we want to be able to assist with this efficiently and effectively, and in many cases, support our external advice partners to help their clients.”
AIA also acknowledged the need for strong consumer protections to ensure that opening up advice leads to improved financial outcomes.
“There is a lot of work still to be done on the detail, so that we can ensure our advisers are appropriately qualified, the provision of advice is clear in scope, there are no misaligned financial incentives, and we have good monitoring and reporting in place,” Mr Mu noted.
“We know there have been concerns from groups like CHOICE about this representing a return to issues of the past, and it is our responsibility to make sure that we set up systems and processes that prevent this.
“We are keen to work closely with CALI, consumer advocates, Treasury, Parliament, regulators, and the rest of the financial services industry in 2024 to design a framework that delivers the best possible outcomes for Australians.”
TAL group chief executive and managing director Brett Clark said the government’s proposed reforms “recognise a role for life insurers to be able to offer additional help to our customers with what are quite often basic questions and needs”.
“We understand the responsibility that comes with providing customers with this additional help, and how important it is that we get it right for them,” he said.
“TAL will continue to constructively engage with government and all stakeholders on the detail of the Delivering Better Financial Outcomes package, which we believe will foster a more robust advice ecosystem and support millions of Australians to access quality advice that is fit for purpose when they need it.”
Insurance Council of Australia CEO Andrew Hall said modernising the advice regime will allow for better interactions between insurers and their customers.
“Insurers share their customers’ frustration with the one-size-fits-all approach of the current regime,” he stated.
“The regulations put in place following the Hayne royal commission recommendations were well-intentioned, but by seeking to strike out bad financial advice, got rid of insurance advice for most ‘mum and dad’ consumers.
“Today’s announcement is a positive development for Australian consumers and should lead to more empowered and informed insurance customers being able to take greater control of their financial future.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.