Monday 17th August, 2020.
We did a lot of work to help planners, even before ASIC issued its regulatory relief. Our view is that if you are assisting a member with issues such as budgeting, cash flow and debt management, eligibility for Centrelink and so forth, then you aren’t actually giving financial product advice, so you could do that without having to go through the same advice regulatory framework.
There was obviously a lot of market volatility at the same time as early access was announced, so in some funds, planners moved away from being focused on pre-retirement planning so they could essentially meet whatever member needs came across the phonelines. That included some advice around early release, but also around market volatility.
Since that frantic time at the very beginning, it’s settled down a little. At some funds, planners are doing more single issue, simple advice. People who are still working are likely to be putting off their pre-retirement planning at the moment.
I think it will. Now, both the planners and the members are more comfortable with the idea that advice can be delivered through video meetings. There has been a tendency to associate simple advice with the lower-cost channels and more complex advice with the higher cost channels, but I think this has proven that the channel is distinct from the service. You can deliver the lower cost, simple advice – which we tended to do only via phone in the past – by sharing a screen and it can be just like a face-to-face experience. More complex advice can be delivered by phone with emails supporting the call, or by video conferencing.
So the channel and the complexity of the advice are actually unrelated, and I think the pandemic has driven that home to both the planners and the members receiving the advice.
We surveyed our clients early on to see what their advice teams found the most challenging. It was just a short survey to give us a snapshot, but interestingly, the challenges were largely around converting to a new operating model rather than the types of issues that members were throwing at them. The planners who needed to change the type of conversations they were having, found they could do that quite easily. It was more the operating environment – different technology platforms, and security and privacy issues to be aware of when working from home, which is of course really important when you’re dealing with people’s highly sensitive information. The logistics were difficult in the very early days but has well settled down now.
In states outside Victoria some people are starting to move back to more face-to-face appointments, but the majority of our clients are still delivering most of their advice via a technology platform, not in person.
So, there were opportunities too. Operational efficiency certainly came through, along with the opportunity to serve regional clients better using video conferencing and shared screens to enhance the phone service, which rarely happened prior to COVID-19.
A couple of funds asked their planners who generally work in the broader, comprehensive advice space to help with urgent member queries that needed to be solved on the spot. Realising their team can also provide a rapid response, simple advice service, gave those funds great insights into the capability and flexibility within their advice teams.
The issue of being able to deliver scoped advice is certainly on the public policy radar.
The House of Representatives Economics Committee has initiated some discussion around the value of limited, or scaled advice, and whether it can be delivered in a way that’s consistent with the best interest duty.
But on the other hand, you’ve got Senator Jane Hume (Assistant Minister for Superannuation) saying that she thinks that it will be an opportunity for the industry to really step up to the plate and offer more limited and scaled advice.
Just recently the Financial Planning Association and NAB have supported the expansion of scoped advice and the opportunity to offer it in a cost-effective way to super fund members.
I think that it will get regulatory attention. ASIC is doing some work around access and availability of advice and I think it will get some attention in that review.
We’re certainly continuing to have discussions with our clients and AIST members about where we think there’s regulatory uncertainty or regulatory blocks to delivering that advice to households.
I think that it does require an across-the-board review, rather than just looking at ‘what can you do intra-fund’, or ‘what can you do scaled’, or ‘what’s the disclosure obligation around this’ or ‘the fee-charging model around that’ without stepping away from the current model of advice. We need to ask the question: ‘If I was starting from scratch, how would I design a service to meet the needs of ordinary working Australians who want some help, guidance and assistance around saving for their retirement?’
If you were designing that service from scratch today, with the skill set in the workforce, with the technology that’s available and with our knowledge of behavioural finance, and consumer behaviour more generally, and if you’re designing it without conflicts driving the offer of advice, but genuinely as a service to consumers, then I think you’d design something quite different to what we have now.
Certainly the decision by the big banks to exit financial advice and the unwinding of commissions in financial advice has had an impact on affordability. If you have to charge full-freight for advice and can’t subsidise it with commissions, the price of advice is going up – there’s no doubt about that.
If the planner on high street is charging full-freight, they will focus on people who’ve got the ability to pay five, six, seven thousand dollars for the advice, rather than $2-3,000 that has traditionally been charged. I think the self-licensed planners are wanting to attract wealthier Australians as clients, and that’s why we’re seeing a greater interest in expanding intra-fund advice and also digital advice in the financial advice industry more generally.
Ordinary working Australians are unable to pay that sort of advice fee, and it wouldn’t be justified in terms of the benefits generated for them. We have to find a lower-cost service model for those people and that’s really why I talk about a root and branch review – because you would design something that is more efficient as well as more consumer friendly. Small pieces of advice given regularly, rather than one big piece of advice that’s costly.