Tom Connell, Presenter: The Government’s had an about face on financial advice. The cost of that financial advice went up significantly after changes made years ago that were all about protecting consumers. The problem was that it made the price of advice very expensive because protections around it on the information that had to be gathered. The Government is now saying that more bespoke advice will be available, and you will be able to claim it through things such as whoever provides your life insurance. This is the Financial Services Minister Stephen Jones talking about the reforms.
Stephen Jones, Assistant Treasurer: I am announcing the Government will modernise the best interests duty. This will require advisers to continue to focus on what is best for their clients. It will maintain the requirement for advisers to give priority to their client’s interests where there may be a conflict, and it will retain the necessity for advice to be appropriate and fit for purpose. However, the Safe Harbour steps will be removed, and I note that this is the implementation of recommendation 2.3 of the Hayne Royal Commission.
Tom Connell, Presenter: Joining me live now is Council of Australian Life Insurers CEO, Christine Cupitt. Thanks for your time. Look, if we go back many years, I’m not going to bore the viewers too much, but the overhaul of this after some scams around financial advice from banks actually meant financial advice went up. You had to get massive amounts of information from someone. Three and a half thousand dollars, the average price. What sort of entry price now, could people get for financial advice, for example, through their life insurance?
Christine Cupitt, Council of Australian Life Insurers CEO: Well, today’s announcement is wonderful for Australians. We know that Australians have been crying out for better access to more financial advice, and today’s announcement means that more people will have access to the information they need to make informed financial decisions. What this means for the cost of advice is multifactored but overall, today’s announcement is about getting more simple advice to more Australians in a cost-effective way.
Tom Connell, Presenter: So, if someone’s gone along before, after the changes, if you said, oh, I just want a bit of advice on what to do with this lump sum from work or whatever it might be, but you’d have to get a full assessment. What’s your risk profile? Dozens and dozens of pages. It costs the company a lot to do. It costs you a lot. Now, this could be, what? A lot more bespoke? You might just want to know what to do with an inheritance. Simpler advice and cheaper advice, that’s what’s going to be able to be offered?
Christine Cupitt, Council of Australian Life Insurers CEO: Every day, life insurers have people calling into their call centres with simple questions about their life insurance needs. Things like a change of circumstance, I’m having a baby, I’ve just got married. What does this mean for my life insurance? People want simple answers to those kinds of questions and, as you say, without necessarily needing or wanting a full financial plan. Today’s announcement means that life insurers will be able to give their customers more simple answers to those everyday kinds of enquiries that Australians deserve access to answers on.
Tom Connell, Presenter: Yeah, and so that might be as simple as saying, look, my financial situation has improved, ie. the lump sum that I spoke about. Should I pare back my life insurance? Now, there’s never one answer to that. It’s obviously just advice. How do we make sure consumers are still protected and they’re not, say, overpaying because a life insurance company theoretically would say, get the highest policy possible, get an expensive one.
Christine Cupitt, Council of Australian Life Insurers CEO: Well, you’ve hit the nail on the head in that everybody’s needs are different and everybody’s experience of financial advice will be different. Advice from the life insurer means that Australians can turn to a provider that they trust and they have an existing relationship with, and they’re able to get that specific advice about their specific enquiry in a timely and cost-effective way.
Tom Connell, Presenter: Any idea on what it might cost? So, as I said, the average cost of financial advice has ballooned to three and a half grand. If they’re just having an enquiry about where they should set their life insurance, do you have a ballpark on what that might be costing down the track?
Christine Cupitt, Council of Australian Life Insurers CEO: Well, the legislation that sits around this is wrapped up with some very clear consumer protections, and one of those is the way that advice like this will be paid for.
Tom Connell, Presenter: Tiered basically in terms of cost? Or, how does that…?
Christine Cupitt, Council of Australian Life Insurers CEO: So, it puts restrictions around paying the people providing the advice in a way that gives them the wrong incentives. So, this framework is about how we support our customers, how we get advice and simple answers to them within a legislated framework, which provides all the right incentives to deliver better customer outcomes.
Tom Connell, Presenter: But can you give us a ballpark on the cost? I mean, you could call up, have a few simple questions, get a response, someone does an hour or two of work, and it might cost a couple of hundred dollars? Could it be as cheap as that?
Christine Cupitt, Council of Australian Life Insurers CEO: It could be as cheap as that, yes.
Tom Connell, Presenter: All right, Christine Cupitt I appreciate your time today. Thank you.
Christine Cupitt, Council of Australian Life Insurers CEO: Terrific to be here.