An Interprac Financial Planning manager has expressed concerns about the extra costs being imposed on the financial advice industry due to new legislation, saying this will lead to firms closing down as well as increase the cost of advice.
Speaking to ifa, Interprac national compliance manager Michael Butler said the proposed ASIC user-pays funding model will be the “trigger point” that may drive many financial advice businesses and accountants out of the industry.
Earlier this month, the government released a proposals paper for the new funding model, which shows the advice sector will be levied $24 million to refund ASIC, or $960 per financial adviser.
This new levy will be in addition to costs associated with transitioning to the new education standards, re-registering with the Tax Practitioners Board and, ultimately, funding an education standards setting body on an ongoing basis.
Many firms will also experience a drop in revenue thanks to the Life Insurance Framework bill, Mr Butler said.
“We don’t disagree (with LIF), but the problem is that this is all coming at the same time,” he said.
“The trigger point is the ASIC industry funding model. The licensees cannot afford to absorb that cost, so it’s going to be paid directly by the advisers.”
Mr Butler also expects that many accountants, who secured a limited licence this year, will reconsider whether it is worth providing SMSF advice.
“Their primary business is accounting. When does it become all too expensive for the accountant to continue paying these added costs?” he said.
“They’ve come across [to advice] and all of a sudden they’re now being hit with all of these cost increases and it’s going to be difficult for them to cover these costs.”
Mr Butler further predicts the cost of advice to rise, which will lead to more unadvised Australians.
“The cost of advice has to go up because of the imposts. There just won’t be enough people around to be in that mass market. The high net worth people will continue to be serviced, but the people who really need advice - the mass market - are going to fall into the clutches of robo-advice," he said.
“Particularly, if the institutions do pull out of the distribution space, and I believe that they will, it is going to further exacerbate the number of people not receiving advice."
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