‘Enough space’ for independent advice and institutions

There has been considerable concern from advisers following Financial Services Minister Stephen Jones’ December announcement that banks and superannuation funds will be invited back into the financial advisory field as part of the Quality of Advice Review (QAR) reforms.

Speaking on a recent ifa podcast, chief executive of the Financial Services Council (FSC) Blake Briggs said he expects the reforms to have a positive impact on the future of the advice industry.

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“If you think through the things that will actually materially make advisers’ lives easier in how they serve their clients, the changes around the safe harbour steps, the documentation requirements, statements of advice, they’re really important reforms and they’re reforms the industry, as a whole, agrees on,” Mr Briggs said.

“I’m very confident there’s enough space to both have independent financial advisers and small advice groups and some of the larger advice licensees, as well as institutions like superannuation funds.

“The reality is there will be different organisations playing at different price points and different levels of complexity, and that is what we need to do in order to get much more advice out to people across the income scales.

“The government was always going to need to balance the range of interests along with the overarching goal of increasing the number of people that get advice, as well as the cost of delivering that advice and reducing that.”

As a large population of Australians approaches retirement, the demand for financial advice is increasing.

The reintroduction of large institutions into the field may prove the necessary solution to accommodate the influx of clients and promote more competitive pricing, making advice more accessible for lower income earners.

Adviser Ratings’ latest quarterly Musical Chairs Report, for instance, discovered that although dozens of advisers have joined the field in the last three months, more than three times as many have departed.

Institutions re-entering the field could more than make up the losses, allowing more Australians to access different levels of financial expertise, depending on their needs.

However, the process of implementing these reform changes will be long, so Australians will have to wait before getting access to these institutionally employed financial advisers.

Mr Briggs noted that while some institutions are already raring to go, others will likely wait before making the jump back into financial advice.

“Superannuation funds are looking very closely at this. I don’t think that’s a surprise. And so they’re likely to be the next cab off the rank in terms of bringing solutions to the market,” Mr Briggs said.

“I have no doubt the other institutions are looking at this and there’s probably varying degrees of preparedness, but I think a couple of things have to happen first. One, is we need to see the final shape of the regulatory regime because risk tolerance is very low post-royal commission period.”

The head of the FSC also noted the importance of maintaining customer protections and interests as these institutions move back into the advisory space.

“These organisations will need to have really clear systems in place. And ASIC will be taking a very close look at things like calling scripts and databases and product relationships to make sure that consumer interests are prioritised. And that is exactly how it should be,” Mr Briggs said.

“The question will be, how can they ensure that they’re putting the interest of the consumer first regardless of whether or not they also run a superannuation fund and the like.”