Contribution strategy and consolidating MySuper accounts should be classified as ‘simple personal advice’ while consolidating other accounts including defined benefit should be classified as ‘complex personal advice’, according to Rice Warner.
The research house’s ‘Future of Advice’ report commissioned by the Financial Services Council (FSC) recommended new legal definitions for classifying financial advice.
These were:
On superannuation advice, it said contribution strategy should be changed from ‘personal financial product advice’ to ‘simple personal advice’ as consumer risk and product complexity was low, and only needed a record of advice (ROA) to be delivered by a para adviser or through software.
This was the same for consolidating MySuper accounts where its consumer risk and product complexity was at ‘low-medium’.
However, it said consolidating other accounts including defined benefit had a medium consumer risk and a medium-high product complexity and therefore should be classified as ‘complex personal advice’ from ‘personal financial advice’. This would require a statement of advice (SOA) deliver by an adviser or specialist.
When it came to retirement advice, including pre-retreatment, retirement, and consolidating retirement products, Rice Warner recommended they all be categorised as ‘complex personal advice’ and needed SOAs delivered by and adviser or through software.
For SMSFs the research house said advice surrounding establishment, accumulation only, and pension alone or with accumulation should be classified as ‘specialised personal advice’.
All should require a SOA delivered by a specialist. Establishment had the highest consumer risk and product complexity at ‘high’.
While the Financial Advice Association Australia said it supports a performance testing regime “in principle”, it holds reservations about expanding this scope to retirement products.
In a Senate submission, the Financial Services Council said super funds should be able to nudge members on engaging with their super and has cautioned against default placements.
The Joint Associations Working Group, which counts FSC in its ranks, has issued an urgent warning to the government.
Senator Jane Hume will join the speaker lineup at the inaugural Australian Wealth Management Summit.
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