Scaled advice may not effectively work smoothly as a way to reduce the cost of advice, as it may not be in the best interests of the client, according the director of Synchron.
Don Trapnell, Synchron director, said both the government and the Australian Securities and Investments Commission (ASIC) had been openly stating that scaled advice was a way of reducing costs to consumers.
“The trouble is – and I agree with it –providing strict life insurance as opposed to full holistic financial advice is scaled advice,” Trapnell said.
“But the challenge is, if you do a scaled advice piece for a client, you still have a best interests duty and that best interest duty says you still must consider all their relevant circumstances.
“Which means risk advisers still have to go through the full fact find process and if that risk adviser finds a shortcoming in that client’s retirement planning based on the goals they’ve set in the fact finding process, they have to refer that to another adviser or do it themselves when they’re not qualified.
Trapnell said that was a result of best interests duty not working in the best interests of the client.
“There’s nothing wrong with best interests duty, it just needs to be relevant and I’d like to see it replaced with a duty to provide appropriate advice,” Trapnell said.