Speaking on Ausbiz on Thursday, Financial Advice Association Australia (FAAA) chief executive Sarah Abood said despite both sides of politics stating a desire to improve the cost of advice for Australian consumers, everything that has happened over the last 12 months has had the opposite effect.
“[The cost of advice] has been a problem for a while and this is something that both the government and the Coalition want to do something about,” Abood said.
“But unfortunately, it feels a bit like many of the things that have changed in our profession in the last year are actually acting to drive up the cost of advice even further.
“We think it’s very important that advice be accessible at all different price points to Australian consumers. So, we’re really focusing on getting the cost to produce advice down because we think that’s a great way to make advice more affordable.”
The compounding impact of increasing and new levies, additional registration requirements, and the ballooning cost of operating a business are all happening against a backdrop of legislation being introduced with a purported goal of improving access to advice.
Whether this will actually happen is something many within the sector are becoming increasingly sceptical about, as the measures are introduced at a snail’s pace and the more impactful areas are held back.
According to Abood, the latest hit of the Compensation Scheme of Last Resort (CSLR) levy, imposing an additional $1,200 on every adviser, is yet another challenge on the affordability of advice.
“In principle, it’s a great idea. The Compensation Scheme of Last Resort actually officially launched just last week, so it’s very new,” she said.
“What it will do is give assurance to consumers that if something goes wrong, if they have a case against a financial advice firm, or another kind of financial firm, where the firm can’t pay because they’ve gone bankrupt perhaps, there is some recourse. This scheme will provide recourse to consumers who’ve had a complaint held out that the firm wasn’t able to pay, so that’s good.
“The challenge is the way it’s being funded, because this scheme is launching with a whole lot of legacy complaints, kind of weighing it down.”
The FAAA has been consistent in its argument against the retrospectivity of the CSLR, previously arguing that the combination of the Dixon Advisory “black swan” event and a shortened government-funded initial period has had a “highly retrospective and negative effect”.
“The issue for financial advisers today is they’re being asked to pay now for things that happened in the past,” Abood said.
“And these are not the financial advisers that did anything wrong. This is about past cases. So that number is going up just in that first year of the scheme in which advisers will be paying over $1,200 per adviser, every adviser, and it’s likely to go up.
“We think it’s really important that we get this scheme set up in a sustainable way and that it’s not contributing to the further increases in the cost to provide advice.”
She added that the only way a scheme such as the CSLR makes sense is if it is “forward looking”.
“If there are determinations that have been made in the past, that relate to failures that happened in the past, they shouldn’t be funded by the compliant financial advisers of today.
“The theory of schemes like this is that the profession itself will act to ensure that no future problems emerge or that when they do, they can be kept under control and caught early.
“But, of course, we can’t do anything about things that have already happened. So, the key issue with the CSLR in our view is that it shouldn’t be retrospective, it should be forward looking.”
Can the FAAA please define in better terms than “yeah but it would have been worse but for us” exactly why we should continue to renew our membership with them? If it wasn’t for CPF status requiring a membership, membership would be down to 1,000. Where is the value for our money when Canberra continue to do as they wish, adversely impacting advisers, why hasn’t the FAAA been able to get through to them?
Financial Advisers have been kicked in the guts every month since Dec 2023. The term Qualified Adviser in December 2023. In January came the need to be additionally registered with ASIC and the levies to pay for it in 2025,..an announcement in Feb with Advice fees up via the removal of GST input credits come July. The requirement in February to lodge breaches with ASIC, leading to additional license costs. Advice fees look set to be banned within Super. It’s been ongoing.
How can the FAAA still possibly support QAR in this backdrop. How can the FAAA still support the Government?
What is the value of FAAA? Membership given the amount of negative legislation in motion.
I look forward to the impending moral hazard in relation to the CSLR, where product providers, licensees etc would have a better outcome by depleting all their assets, for their own benefit, because the advice industry will have to fund any compensation liabilities.
Agree. It would be much more reassuring to advisers paying into CSLR that before any payments are made out of the scheme not only is the licensee responsible for the disaster bankrupted but also any of the advisers who benefited from the poor advice (and their spouses, trusts, related companies, etc).
Why would an Adviser benefit from a product that goes under?
My view is that after 2026 there will be quite a bit less than 10,000 ‘advisers’ (investment advisers) and less than 100 pure risk specialists. The experienced investment advisers and specialist risk advisers who saw the writing on the wall (legislator stupidity, culpability and unreliability) back in 2020-21 have been biding their time.
Even with the clause saying full uni degrees are not required for the 10 year+ advisers there’s little incentive to stay. With unnecessary compliance idiocy soaking up valuable client-facing time and the unsustainable level of commissions for risk advisers. This is not to mention the substantial risk of persecution for the simplest oversight in advice or paperwork. Why would any sane adviser wish to keep doing this under these circumstances?
The super funds have really done well to get the legislators and special interest lobby groups to make it so advisers are driven out. This is as plain as the nose on your face – super funds being given much more latitude in giving advice (there’s MORE to come), this new ‘class’ of ‘adviser’ the politicians have created and the continuing increase in red tape (thanks Jones!) all add up to push advisers OUT and keep new entrants OUT. The super funds can soon have it all!
And any and all Real Advisers know the conflicted, uneducated, unqualified Industry Super Sales, so called Advice will be another RC worthy disaster.
Trust me. Financial advisers will also get blamed for that and need to fund the compo also
It worked well for CBA so that strategy will work well for Hesta. No doubt a small group of rouges within HestaSuper, not Hesta’s super fault.
Given the continual bad legislation being put in place, that whole a slow death by legislation, when combined with entrant requirements and average age of advisers. I would think it will be around the 5,000 number by 2028, which is a good number for ASIC. It’s very clear the Government is anti-small business and wants to eliminate Advice whilst driving people onto the Age pension. 2028 will be good for those advisors left, but I don’t think 50% of advisors will make it.
I would expect the FAAA to halve the number of Directors and staff too.