New rules could make it easier to get financial advice

The Actuaries Institute has released a new financial advice framework to help increase the uptake of financial advisers by clearly defining three levels of financial support.

At a glance

• Help: basic factual information, tools and calculators so people better understand various services and processes.
• Guidance: suggestions, "nudges" or directions based on a person's general circumstances.
• Advice: personalised, professional recommendations that consider a person's financial situation and goals.

Millions of Australians may soon find it easier to access financial support - whether that's a quick question about their super, some help planning for retirement, or comprehensive professional advice.

The Actuaries Institute has launched a new Help, Guidance and Advice (HGA) Framework to clarify what financial support consumers can receive - and what providers can legally offer without breaching financial advice laws.

"Our framework provides the architecture that will enable millions of people of all ages to receive support in different levels of complexity and that fits their individual needs," says Andrew Gale, chair of the HGA Working Group at the Actuaries Institute.

Gayle says the HGA framework is needed because existing regulations treat all financial advice as equally complex and fail to distinguish between what is simple guidance compared to comprehensive planning.

"Middle Australia stands to benefit most," says.

"Comprehensive advice is out of reach for many, but help, guidance and simple advice at pivotal moments can significantly improve people's financial wellbeing."

Three levels of financial support

Help: The "how do I do this?" level

Help refers to factual, non-personalised information - like how to roll over your super, fill out a withdrawal form or update insurance details.

It's the kind of support you'd expect from a call centre or online chat, practical but not tailored to your situation.

Help is low risk legally, as it doesn't count as financial advice. However, the information must still be accurate and current.

The Actuaries Institute warns that many consumers currently mistake Help for something more.

If a staff member explains how to switch investment options, a customer might take it as personal advice when it's actually just general information.

Guidance: The "what should I consider?" level

Guidance sits between Help and regulated Advice. It goes further by offering tailored scenarios or general suggestions based on the specific details of the customer.

Unlike Help, Guidance can factor in some personal details but doesn't recommend specific products.

Examples include retirement goals, budgeting, life insurance needs and using home equity as income without crossing into product advice.

It's often seen within online calculators or general planning tools that guide users through potential scenarios based on typical profiles such as age or income bracket.

In essence, Guidance asks: "What should I consider before making a decision?"

But without a definition of what is guidance, the Actuaries Institute argues advisers are at greater risk of encroaching on advice.

This leaves many only offering Help, concerned they could get in trouble if customers treat the general advice tools or nudges as definitive personal advice, leading to actions that may not be in their best financial interest.

Christine Cupitt, CEO of the Council of Life Insurers (CALI), says this results in customers ringing their call centres and not getting simple personalised answers to their questions.

"The challenge we face is that, in asking and understanding a little bit about our customers' circumstances, we move into the regulated personal advice space, and that comes with the kinds of requirements that apply to financial advisers."

Advice: The "what should I do?" level

Personal Advice is the most comprehensive - and most regulated - form of financial support.

It's based on a full understanding of your financial situation, goals and risk appetite, and must be delivered by a licensed provider.

Advice is heavily regulated under financial advice legislation. Financial services entities providing advice must ensure they meet all regulatory requirements, including providing access to an AFSL, adhering to the best interest duty and providing appropriate advice.

Some financial services providers, such as super funds, currently offer free intra-fund advice. This usually covers contributions, investment strategy and insurance but only as they relate to your super account.

Other providers offer full comprehensive advice, holistic and tailored to your entire financial situation.

It can cover everything from retirement planning and non-super investments to debt, insurance, government benefits and aged care.

However, the cost and availability, according to the Actuaries Institute, often restricts the service for many Australians.

A system under pressure

Australia's financial advice system is under strain.

Studies show those who get financial advice are better off financially.

But with the cost of comprehensive advice surging into the thousands and with only 15,500 financial advisers to service all of Australia, many Australians are left without financial support.

"We have a tsunami of retirees coming over the next decade, but many don't want or need or cannot afford full, comprehensive financial advice," says Gale.

"Giving them help and guidance on common issues - such as Age Pension entitlements, and how to think about paying down debt and moving superannuation to a retirement phase account - would allow them to retire with greater confidence."

Younger Australians also stand to benefit.

"Many would gain from greater help and guidance - on things like how to consolidate super accounts, better budgeting, and the amount and kind of life insurance they should consider," Gale says.

The Actuaries Institute's paper, Financial Advice Reform and Help, Guidance and Advice, was developed after extensive consultation with super funds, consumer groups, industry and professional bodies.

If adopted, the Institute argues the framework could expand the capacity of advisers, accountants, super funds and digital tools to support millions, including the estimated 710,000 Australians planning to retire in the next five years.

Get stories like this in our newsletters.