Call for aged care financial advice to be regulated by ASIC

Senior Australians and financial planners are calling for aged care financial advice to be regulated by the Australian Securities and Investments Commission as the financial arrangements for nursing homes become increasingly complex.

Earlier this month Estia Health became the latest aged care provider to charge an additional fee for residents who choose to pay for their accommodation in a lump sum, rather than in instalments. The way in which such asset replacement fees are levied varies between providers and can be capped or uncapped.

Aged care specialists argued that such fees, which are also charged by listed groups Regis Aged Care and Japara Healthcare, added another layer of complexity to an already fiendishly complicated financial model.

Consumers vulnerable

Consumer groups are concerned that in the absence of official oversight, consumers are at risk of being subjected to inexperienced, misinformed or unscrupulous planners at a time when they need to make important financial decisions, often under distressing circumstances and in a hurry.

"We have already seen financial advisers magically call themselves aged care specialists even though they have no expertise," National Seniors Australia chief executive Michael O'Neill said.

The Financial Planning Association argued that after estate planning and establishing a business using various structures, aged care financial advice was the next most complicated area of personal finance.

"Aged care is significantly more complicated than normal, run-of-the-mill advice over setting budgets, transition to retirement strategies and salary sacrificing," FPA professional standards and advocacy manager Benjamin Marshan said.

Furthermore, the number of people seeking aged care advice is likely to grow as the population ages.

The Council on the Ageing (COTA) argues that aged care financing should be considered a financial product, thereby requiring advisers to obtain a financial services licence from ASIC.

"Aged care financing is not a financial product and is not governed by ASIC. We are pressing for that to change. We will pursue whoever is next in government to change that provision," COTA chief Ian Yates said.

National Seniors was ambivalent about the mechanism by which aged care advice should be regulated, but said proper scrutiny was required.

Call for regulation

"The government has created a much more complex decision-making area for consumers. The important thing is that it is put on the agenda for this to be regulated by ASIC. Vulnerable consumers are being exposed to an area with poor regulation," Mr O'Neill said. He said he had raised the issue with Assistant Treasurer Kelly O'Dwyer.

The FPA argued that rather than turning aged care advice into a financial product, the government could introduce legislation requiring aged care advice to be regulated by ASIC in the same way as financial product advice. "I think it would be appropriate for the government to consider that type of regulation," Mr Marshan said.

Louise Biti of consultancy Strategy Steps said there was no need to single out aged care advice as an extra area requiring ASIC oversight. However, she argued that rather than regulate financial products, ASIC should oversee the provision of advice, which would include advice for aged care, estate planning, super and retirement planning.

The call for official scrutiny of aged care financial advice comes as analysts raise questions about the sustainability of earnings at the three big aged care providers. Bank of America Merrill Lynch has downgraded Estia, Japara and Regis following detailed analysis that revealed the stocks were facing zero earnings growth. Estia and its peers have come under pressure due to constraints on federal government grants called Aged Care Funding Instruments, which are given to the operators to look after their residents.

In early June Estia introduced an $18 a day charge for residents who meet the cost of their accommodation upfront, rather than paying in instalments.

Regis has a $13.70 a day "asset replacement contribution", while Japara has introduced a "capital refurbishment fee", set at $10 a day.

Ms O'Dwyer said she was prepared to consider bringing aged care advice under ASIC. "The minister is always open to policy submissions and would consider them accordingly with the normal policy processes," a spokesperson for Ms O'Dwyer said.

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