This week I am writing on something closer to home – the Government’s release of the financial advice reform package following the Quality of Advice Review. The reason for writing is to explain some of the significant changes occurring given these changes are mostly invisible to the Australian public, but will have a big impact on the cost and quality of advice that is being delivered. Apart from creating an unlevel playing field, the changes wilfully encourage conflicted remuneration. The Industry super funds will be allowed to charge a percentage of fees for this “group” advice across all members of their super fund and there will be no ability to opt out of this. For these “good advice” providers their product universe will consist only of the suite of funds available under their super employer. Given these people would be remunerated based on holding funds with their employer, will they ever recommend going to cash? I would be surprised. What if the fund they are employed by is a “dog” performance wise. Will they recommend to go elsewhere? Once again I would be surprised. I laud the aspiration to inform and empower Australians to plan for their future and their retirement but reverting to what are effectively tied agents, with limited training while acting for their respective Industry super fund will not end well. It did not end well previously just 5 years ago when the Banks were forced out having been forced to pay millions of dollars in remediation costs, so why would this time be any different?
|