Scope, competency, and charging arrangements will be critical when it comes to superannuation funds providing financial advice, according to Minister for Financial Services, Stephen Jones.
Speaking at a Financial Services Council (FSC) event in Sydney, Jones was asked by FSC chief executive, Blake Briggs, what factors will help in providing retirement income advice.
In its formal response to the Quality of Advice Review released in June, the government outlined a second stream of expanding access to retirement advice. If it progresses, this will see the restrictions on collective charging amended to allow super funds to provide more retirement advice and information to their members.
He said: “When I look at it from my position, there are three core things that need to be squared away.
“What is the scope of advice that the fund will provide? What competencies are required to provide advice such as qualification or units of knowledge? What are the charging arrangements?
“It will sink or swim on nailing these matters.”
He said the government has opted to focus on super funds providing advice as this is a “safer sandbox” compared to banks or insurance firms.
“If we can’t get it right in retirement, we have no hope in any of the other areas. They have different fiduciary duties, different prudential arrangements, it’s a much safer sandbox to progress these things than in banking or managed investment schemes which have very different arrangements to super,” Jones said.
“There’s more protection and prudential oversight in super and it’s the biggest part of the biggest problem.
“If we can’t make it work with RSEs, it will be incredibly challenging for us what we need to do in other parts of the financial services industry.”
A second reason for opting for super funds, he said, is that it is easier to compensate for bad advice in a super fund as there are more safeguards in place than other parts of the industry.
According to the Australian Financial Complaints Authority, there are special rules and requirements for complaints regarding super funds and there are no monetary limits for super complaints.
“That capacity to compensate when something has gone wrong is always going to be greater in an RSE than when something has wrong with an individual financial planner,” Jones said.
“We can’t design an absolute foolproof system in this area, but what we can do is ensure the ecosystem has safety nets in place.”