The new class of advisers proposed by the government as part of its advice reforms should be limited to dealing with products already owned by consumers, with that restriction the preferred option for advisers and product providers, the Financial Advice Association Australia (FAAA) has stated.
FAAA chief executive Sarah Abood told members the representative body was involved in consultations with the government about the second tranche of the Delivering Better Financial Outcomes changes and was limited in what it could disclose, but it was pushing for a clear definition on the scope of advice that will be provided.
“The new class of adviser remains a big focus for our members,” Abood said during an online member briefing yesterday.
“The most important piece around the new class is what can they talk about.
“How will we restrict their scope and make it clear to consumers the service they’re getting from this group is different to what they can get from a professional adviser and will be more constrained?
“Our suggestion is the simplest way to limit the scope of the new class of adviser is to limit them to engaging with the consumer on products they already hold.
“This removes a lot of complexity around how complex is the strategy and how much money does the client have. All sorts of problems go away if you have the scope limited in a really simple and easy-to-understand way.
“It would also meet the stated needs of the product issuers who have said what they’re looking to achieve with these reforms is an ability to service and support existing clients who don’t have the benefit of financial advice and would struggle to afford the cost of a financial advice engagement.”
She said the FAAA had put forward other options, but these were not as simple as the product-related limitations suggested.
“We’ve suggested you could look at the circumstances of the client,” she added.
“In the same way as wholesale and sophisticated investors are defined by their income and assets at the top level, you could have a definition at the bottom level, which perhaps it might be qualifying for the age pension.
“We could also define products and/or strategies as being complex or simple, but it would be more time consuming and hard to get consensus across the profession.
“There are a couple of options there, but we’ve said that it needs to be really clear and simple what their scope is and really apparent to the consumer.”
