Speaking to ifa ahead of his meeting in Canberra, the executive director of the Association of Independently Owned Financial Professionals (AIOFP), Peter Johnston, said that compliance, specifically the provision of statements of advice (SOAs), is a significant challenge in the financial advice industry, leading to a surge in costs.
“SOAs are technically illegal, because they’re meant to be simple and concise, and they’re going up to 100–120 pages. They are just ridiculous. They’re costing 3, 4, 5 thousand dollars apiece,” Mr Johnston said.
“Very few consumers even read them, so it’s just been a ridiculous situation.”
According to Mr Johnston, the previous government is responsible for the circumstances that mandated advisers to create SOAs of the current size and cost.
“It’s pretty clear that they wanted to get rid of financial advisers,” he opined.
Although Mr Johnston has been a staunch opponent of the Quality of Advice Review (QAR) since its inception, he does acknowledge the value of some of Michelle Levy’s recommendations, especially the one concerning SOAs.
Regarding SOAs, however, he does believe that “some type” of written document should be maintained.
“It’s to protect advisers and protect consumers,” he said.
“Our industry has been hijacked by the legal fraternity, they’ve seen a way to make fees out of making compliance as complicated as possible, and guess who is paying for it, the poor old consumers.”
Expanding on his view of QAR, Mr Johnston said he is categorically opposed to the return of superannuation funds, banks, and insurers to advice. He argued that not all Australians need or want financial advice.
Quoting recent Super Consumers Australia research, which revealed that only 25 per cent of Australian adults look to the expertise of professionals (e.g. advisers) to assist with retirement planning, Mr Johnston argued that the current number of advisers is sufficient to meet these requirements.
“Of course, we want some more advisers back in there, but when you look at the performance of the funds being managed by some of these institutions and the quality of advice, which is what came out of the royal commission, you don’t want their advice anyway,” he said.
“We think there are enough advisers, but there should be more, and we think that the quality and standard of advice coming out of the banks and the other institutions, in the last 10–15 years, has been extremely poor.”
Mr Johnston and the AIOFP are due to meet with the advice and investment branch of the Treasury’s retirement, advice, and investment division on 4 April to discuss the QAR. This branch, ifa has learnt, has been tasked with facilitating the consultation process that will inform the government’s QAR response.
Speaking ahead of the upcoming meeting, Mr Johnston stated that the AIOFP’s agenda includes raising concerns about the compliance burden and emphasising the importance of retaining the best interest duty.
To hear more from Mr Johnston, tune into the ifa podcast from 5pm.
