In its pre-budget submission to Treasury, the AFA said cost concerns were currently discouraging advice practices from taking on professional year trainees, with the industry’s reputation fallout from the royal commission having already drastically shrunk the pool of graduate candidates.
“There are a range of factors in play here, including the FASEA reforms and increased requirements for new entrants to the profession; the discouragement from entering the financial advice profession as a result of the negative slant from the royal commission; [and] the exit of the large institutionally owned licensees, who were previously an important sector of the market for the development and support of new entrants,” the association said.
With 100 hours of structured training and 1,500 hours of on the job training required before a provisional adviser could be fully qualified to serve clients, the AFA said there was a “significant cost involved” for businesses to bring on new entrants.
It recommended the government provide a subsidy of $10,000 per trainee adviser, which would make a “material difference” in encouraging advice practices to bring on trainees.
“The majority of financial advice practices are small businesses who are currently under tremendous financial strain, however with the right incentive, they could grow their businesses and provide valuable employment opportunities to students after many years of study and set them up for a meaningful career,” the association said.
The AFA said just 58 provisional advisers – those in the second half of their professional year, who had passed the FASEA exam – were currently listed on the ASIC adviser register, compared with 7,600 who had left in the last two years.
“More needs to be done to ensure that [those leaving] are being replaced by new advisers and to encourage more employment and growth in small business and more jobs for students,” the association said.
“The decline in the number of financial advisers limits the accessibility of advice for Australian consumers, and is only going to get worse over the next few years without strong actions from the government.”
How about not classing all the entrants as new entrants and having to do the professional year.
Surely there would be a better system for people who have already been in the industry for numerous years but are now having to do a professional year because they hadn’t done a degree to FASEA standard yet.
These people could be brought into a practice or some may already even work in practices much smoother then a total new entrant.
Outside of salaried advisers for big companies and potentially bigger businesses in major cities you will absolutely struggle to find a business that’s even in the position to do the professional year as it stands.
Who is going to buy your business and who is going to service your clients when you stop? I can’t even find a Para-planner I have to offshore and outsource that.
A big problem is we’ve ruled out students that studied a Bachelor of Business, Commerce, Finance, Accounting from entering the financial planning industry. (thank you FPA). By the time they’ve finished, worked in Accounting/Banking/Finance firms and want to get into face to face advice, they’ll need the equivalent of a Masters. Having just finished working for a University to include FASEA units the ability to get new entrants, paraplanners, qualified support staff is going to get even harder still. It’s going to get impossible for Rural and non metropolitan practices. Whilst this is a good move it’s putting a band aide on a leaking pipe. Leadership in this industry is lacking and what’s there, is out of touch and killing off advice.
Thank you AFA for at least trying compared to the do nothing FPA. However, $10k is not going to sway me at all as the costs and risks are extreme and that we are an 8 person firm.
The big picture is the Annual Opt – in and other excessive red tape burden which is forcing firms to abandon or DUMP hundreds of their smaller clients as the new costs per client are too high for these clients. Really, the line in the sand now is about $250,000 for most smaller firms. Anyone with less than this cannot be a client. We have abandoned approximately 420 clients. Multiple this by 1,000’s of firms nationwide. A very large firm I know had to remove over 3,800 clients that now do not generate enough income to cover the rising costs on a “per client basis”.
As costs increase this breakeven point will rise to $300k to $400k.
If existing advisers are limited to a maximum 200 to 220 ongoing review clients per annum due to the excessive burden of regulation that is redundant duplication or overreach then this massive problem is going to get even bigger than we all can comprehend or understand right now.
100 to 200 (even 500) new very green advisers per year will never solve this!
I’m not sure $10K will make much difference. The Professional Year needs to be incorporated into an additional year at uni, incorporating elements of unpaid internship in financial planning practices. The FASEA exam should also be incorporated into that additional year, and made a prerequisite for graduation.
It is more than a little surprising to me that there would be any entrants into this profession when they could be an accountant or solicitor with significantly better prospects. The risk/return trade-off simply does not add up for advice under the current compliance regime.
I feel that the advice industry has not grasped the reality of cost-benefit: Why would anyone want to take a carrier on advice with such a load of scruitinity, endless record-keeping, and just to be in an environment of stress – they are better off studying to become a teacher – with a 3-year degree they can start as a professional teacher , and within 7 years earn around &120,000: also one can become sparkly and earn the same within few years – the reality is its too stressful to be in advice business – why do you think that ll the big banks has left it 🙂