The law “should not continue to assume that financial advice is being given by a person”, according to Michelle Levy, as she hints that advice from superannuation funds could be given by a digital advice tool.
Writing an op-ed for The Australian, Levy discussed the ‘phase 2’ proposals in the Quality of Advice Review (QAR) that will see super funds giving financial advice to their members in order to improve access to retirement income advice.
This is a recommendation in Levy’s final report, but she has since admitted the government has suggested implementing it “at a larger level” than she had originally envisaged. With super trustees already under pressure from the Retirement Income Covenant (RIC), she questioned the viability of giving funds yet more responsibilities.
The government is now considering how this can be provided by funds including if it can be given by staff who are not financial advisers. It is up to the discretion of the super fund if they want to actively offer financial advice.
Levy said she had heard concerns from financial advisers about funds giving advice from unqualified staff but said advice did not necessarily have to be given by a person, let alone a person with a financial planning degree.
“The licensee responsible for the advice – in phase 2, the trustees of the superannuation funds – is best placed to decide what training staff needs and how advice should be provided,” she wrote in the newspaper.
“In some cases, the nature of the advice may mean the advice should be given by a financial adviser. But in other cases, the nature of the advice may mean it can be given by a person who is trained to follow a script. Increasingly, advice might be given by a digital advice tool and not by a person.
“Even where a person is involved, they might be merely an intermediary between the client and the algorithm. In that case, a degree in psychology or social work might be more valuable than a degree in financial planning. In any case, in 2023 the law should not continue to assume that financial advice is given by a person.”
She also pointed out a joint report by ASIC and APRA earlier this year has found super trustees are already struggling to assist members approaching retirement under the RIC. If a fund provided poor advice to a member, there could be a risk of a class action.
“There is a risk that they are not providing assistance if they do not provide advice or the right kind of advice, and there is a risk in providing advice,” she said.
“We have seen some very large remediations and a number of class actions against trustees relating to financial advice and, while I am not saying trustees will give poor advice (I expect in the main they will give good advice), there remains a risk and ultimately that risk might become a liability shared by members of the fund.”