Non-aligned licensees may struggle to afford increased training costs, in contrast to their vertically integrated counterparts, should higher education standards be mandated, argues the AFA.
In a submission to Treasury responding to proposals made by the parliamentary joint committee (PJC) to lift the professional standards of financial advisers, the AFA raised concerns that the cost of increased education standards may be too much for non-aligned businesses to handle.
“Many non-vertically integrated licensees will find it difficult to fund training from existing revenues,” the submission said.
“This could make it considerably more difficult for them to compete against vertically integrated licensees when recruiting, as advisers may need to fund their own development.
“In addition, salaried advisers are likely to be more expensive to recruit as education standards increase and all advisers will require a higher level of ongoing training,” the submission said.
The AFA added that advisers who need to attain higher educational standards could incur “substantial costs” and time away from servicing clients, which will likely “reduce their income earning capacity”.
“This will have a disproportionate impact on self-employed and small business owning financial advisers when compared to institutionally-based advisers where the institution is likely to provide the capital for the training expense,” it said.
However, Les Mace, chief executive of non-aligned dealer group Risk and Investment Advisers Australia (RIAA) - which recently merged with Beacon Financial Group - said this would not be an issue for his business.
“With all the experience we’ve got and the industry contacts and the educators we’ve got, we don’t need the balance sheet of a bank to be able to provide the quality of education, training and practice development,” he said.
Mr Mace added that many of the new advisers who join his business from vertically integrated models want the “freedom to develop their business free from the pressure of product bias”.
“Those that are new to the industry generally join one of our established practices where they can learn from the best whilst contributing positively to their businesses,” he said.
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