Advice or access, or both?
Richard Walker, from Genesis, speaks about the role and value of advice in the low income market, based on his involvement in a study into this market.
According to Walker there seems to be conflicting regulatory goals based on the different pieces of legislation which governs how financial services products are sold.
The legislation includes, but is not limited to: FAIS, the Long Term Act, Privacy Act, the National Treasury discussion paper, while on the other hand acting as a counter force is the Financial Services Charter and market opportunity.
Walker maintains that advice hasn't moved down to the lower end of the market, and it's unlikely that it will, as the study shows that the advice-less product type offering is gaining ground.
He does however offer a counter to this trend, in that the FAIS ombud rulings are driving advisors away from the advice-less, tick-the-box type selling.
The way ahead is a trade-off between advice and access. And to complicate the issues is the lack of understanding in terms of the difference between advice and disclosure.
There are apposing views in terms of advice. On the one hand the FSB says that a simple needs analysis for a simple product is an option- although no official document has been released, making this position clear, it appears that the FSB is taking the product into account.
On the other hand the ombud says that the advice is based on the needs of the client and not the product.
He suggests that the FAIS ombud should be 'sensitised' to the threat of clamping down on tick of the box selling. If this doesn't occur and the ombud continues to clamp down, there is a big risk that this market sector wont be served.
Walker pointed out that their research had identified a 'new' phenomenon the independent multi-functional agents- selling insurance and other banking and retail products. Added to which there is another grouping operating in the low income sector- the low income organized groups. In this business the members own the agency and will be involved in a range of other services.
