Jones New Advice Reform – Consumers will again be Victims of Poor Advice Outcomes – Consumers and retail super funds are both losers from the government’s DBFO announcement. Late on Tuesday night, Jones announced the government’s second tranche of the Delivering Better Financial Outcomes (DBFO) package, which he said would help fill the advice gap by expanding access to financial advice. According to Jones, licensees will be allowed to charge a direct fee for the advice provided by the new class of advisers (NCAs).
This enables advice businesses, super funds, banks, and insurance companies, to employ non-professional advisers to provide for a fee. There are “two losers” from this rampant stupidity which are consumers and retail funds.
Consumers lose on a double banger. The first level they lose on paying for services they are not accessing – those that are members of the industry super funds. They also lose because it will quash the innovation in retirement income products.
Retail funds lose out because they cannot compete. They will not expose themselves to fee for no service scandals. They will have to charge and so they will lose out, and their members will lose out because they will not innovate new products to the same extent that they might have otherwise. Unlike the industry funds, retail funds also do not have money to run advertising campaigns to promote advice through NCAs.
We are going to end up in the same position before the Hayne Royal Commission with poor advice outcomes of a poorly trained and highly conflicted new class of ‘advisers.
Surely, Jones can see this. The government killed off the professional adviser cohort with over-regulation and now they forget the past and want to set up consumers for another round of poor outcomes. It is outrageous that the government will fail consumers so badly.
This approach encourages super funds to charge fees for no service and flies in the face of the financial service royal commission reforms to end this practice.
In my experience, if the quality of advice currently being delivered by super funds is anything to go by, we are going to have a blood bath of poor outcomes. Most funds are giving ‘one size fits all’ advice, which would either see people run out of money well before they pass away or recommending that people spread their savings well beyond age 100, unnecessarily reducing their standard of living while they are alive.
I highlight my concerns about Super funds have also been exposed for taking over a year to pay people death benefits and governance failures. Is now really the time to give them yet another responsibility they are demonstrably totally incapable of delivering on?