Expanding intra-fund financial advice a 'slippery slope'
Financial planning groups have expressed serious concerns about the Australian Securities and Investments Commission's (ASIC's) proposal to allow transition-to-retirement (TTR) strategies within intra-fund advice.
In Consultation Paper 164, the regulator provided separate examples demonstrating how an intra-fund adviser can deliver factual information, general advice and personal advice about TTR over the phone.
Financial Planning Association (FPA) general manager for policy and government relations, Dante De Gori, said he had no problem with superannuation funds delivering basic information to their members about what TTR was and how it worked.
But he is concerned by the prospect of intra-fund advisers delivering specific financial advice that recommends a TTR strategy, because intra-fund advice cannot, by definition, take into account all of a client's circumstances.
Association of Financial Advisers chief executive Richard Klipin believes that a TTR strategy should only be recommended to a client via comprehensive advice.
"Dealing with complex issues around TTR strategies without regard to the full circumstances of the client is a slippery slope that we don't want the advice profession to get on," Klipin said.
He compared the delivery of intra-fund advice on topics like TTR to visiting a general practitioner who neglects to ask questions about your general health, diet, exercise routine and family history.
"It's unthinkable that a professional would operate that way," Klipin said.
De Gori agrees, and points out that if an FPA member did the same thing "we'd be prosecuting them because they haven't considered the client circumstances - and the client thinks they have".
De Gori said one of the major flaws with ASIC's phone-based personal financial advice TTR example was that the disclosure of the advice's limitations was buried at the very end of the conversation, rather than upfront.
Leaving the disclosure until the end of a lengthy phone conversation could leave the consumer confused about the scope of the financial advice, and it also risked wasting their time, he added.
"The adviser's saying: 'Here's the advice, but by the way I didn't really consider everything, so you should be aware of that'," De Gori said.
Association of Superannuation Funds of Australia chief executive Pauline Vamos agrees that the limitations of the financial advice should be disclosed at the beginning of the phone call.
But she adds that funds must be able to have conversations about TTR with members who have low account balances.
"The average woman retires on just over $110,000. They're going to live 18 years after retirement. Someone's got to tell them: 'Maybe go to part-time work and keep contributing to superannuation," Vamos said.
For Vamos, the phone-based general advice TTR example in the ASIC paper almost constitutes personal financial advice.
"The issue is that the line between general financial advice and personal advice is really grey," she said.
She added that it was difficult to comment about the examples in the ASIC consultation paper until the final definition of intra-fund advice was laid out in legislation.
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