Speaking at the 19th Annual Wraps, Platforms and Masterfunds Conference in the Hunter Valley last week, Mr Blomfield explained that there is a complete mismatch in Australia between those who need advice and those who receive it.
The system, he said, has been set up for the accumulation phase and that most of the “financial advice” being offered in Australia is actually retirement advice. This forces the industry to question what financial advice actually looks like.
“Right up until their mid-30s Aussies are paying for education or saving for a house. At around 42, research shows they start to consider life insurance. Most Aussies start planning for retirement at 54,” he said, adding that massive household income to house price ratios are adding pressure on younger Aussies.
“Back in the early 1980s, it was typical that only one member of the household would work to support the family and pay the mortgage. Today, it’s usually both members of the household who will work and yet they still find it a struggle to buy a home.”
The latest research from Investment Trends shows that 2.1 million Australians say that they want and will get financial advice in the next two years.
“Will that come true? Absolutely not. Not a chance on earth,” Mr Blomfield said.
“For years there have been well in excess of a million people who want financial advice, intend to get financial advice and discover that the service model is not meeting their needs. They discover that whether they are 25 or 55.
“They want to build a relationship over time with an adviser who recognises that the main game when they are young is to buy a house and the main game when they are old is not to die poor. They want all of that done in a way that recognises that it is not a single individual who makes these decisions. It is a couple, it is a household, and it needs to be done in a way that is cost effective for them.
“What we have to do as an industry is work with ASIC to come up with regulations that supports the way that Australians want to receive financial advice. It’s not okay to de-risk the thing to such an extent that only the wealthy can afford advice.
“Post-FOFA, the average wealth of the person in Australia getting advice has doubled. Not because they got good advice. You need twice as much money now to have a planner as you did pre-FOFA.”
[quote=Dumbfounded]Clients don’t want SoAs. They don’t want FDSes. They don’t want Opt-Ins. They DO want service. They DO want advice. They DO want simplicity and everything via the one place if possible (ie a “one-stop-shop” to coin an ugly term). They DO want professionalism. They DO want choice as to how and when and from where they pay their fees. Is anyone in government or ASIC actually listening to this as surely it can’t just be our clients making complaints – not about any shortcomings or lack of service or advice or documentation – they’re complaining because they can’t do anything WITHOUT advice documents and red tape.[/quote][quote=Dumbfounded]Clients don’t want SoAs. They don’t want FDSes. They don’t want Opt-Ins. They DO want service. They DO want advice. They DO want simplicity and everything via the one place if possible (ie a “one-stop-shop” to coin an ugly term). They DO want professionalism. They DO want choice as to how and when and from where they pay their fees. Is anyone in government or ASIC actually listening to this as surely it can’t just be our clients making complaints – not about any shortcomings or lack of service or advice or documentation – they’re complaining because they can’t do anything WITHOUT advice documents and red tape.[/quote]
YES !!!
Now the advice gap there has widened with advisers (IFAs) largely withdrawing from the mass market, increasing fees and only serving the wealthy.
if the ignorant politicians (it is not ASICs fault, they were told to sit back, then to bite… next rollover?) should base policy on research and truths… not ideology and populist views… read this and broaden your perspective with true academic research (not political blather)
https://www.emerald.com/insight/content/doi/10.1108/JFRC-08-2015-0044/full/html
https://theconversation.com/giving-people-extra-responsibility-for-pensions-is-a-disaster-in-the-making-65699
Same story as Australia, only fast forwarded a few years.[/quote]
the trouble is we have a whole generation of advisers with experience exiting. i am one of the few who will remain but my concern with it all is how are all these clients going to be serviced when there is no one left.
yes, i will personally benefit, but the whole community will be worse off. it’s not how i want to win. i feel like bradbury.
I’m an adviser I’ve gone through this ringer with all the changes, but you know where I’m at…
I used to charge $990 for advice fees and now I charge $3,000+ but I actually don’t have any issue getting this paid out of pocket by very average Australians because now they actually believe their government is protecting their interests. People were actually MORE concerned prior to drop money because if they did nothing would happen to the person they gave it to. Now a lot of even average consumers know they are actually paying for quality advice.
Gone are the days of “closing” the client and hello to the new world as a profession where clients walk in and seek a professionals advice.
FOFA is a Labor joke forced on this industry at significant cost which must be passed on. Now we must support ASIC which has never done the job it should be doing. God help the poor consumer !
And the alternative for the everyday consumer who’s not HNW/UHNW? Robo-Advice…which is lacking in tailored solutions and is essentially a legalised version of cookie-cutter advice which is what ASIC have been pinging Advisers for for years now. Suddenly a computerised system does it and it’s the answer?
Clients don’t want SoAs. They don’t want FDSes. They don’t want Opt-Ins. They DO want service. They DO want advice. They DO want simplicity and everything via the one place if possible (ie a “one-stop-shop” to coin an ugly term). They DO want professionalism. They DO want choice as to how and when and from where they pay their fees. Is anyone in government or ASIC actually listening to this as surely it can’t just be our clients making complaints – not about any shortcomings or lack of service or advice or documentation – they’re complaining because they can’t do anything WITHOUT advice documents and red tape.
This unintended consequence was flagged by many practitioners and it was duly noted and thrown in the bin by those politicians, regulators and other activists that thought they knew best.
I think the saying is “I told you so”.
go away. no one is listening to you. good luck getting the “industry” on board.
Financial advice should be made fully tax deductible both upfront and ongoing. At the moment only the ongoing service is tax deductible. If the upfront cost is tax deductible if could eliminate conflict and reduce the cost of advice at the same time.
“What we have to do as an industry is force ASIC to come up with regulations that supports the way that Australians want to receive financial advice.”
Are you taking notes AFA and FPA?
During FoFA Advisers were screaming about over regulation, Opt in and FDS will exclude Australians from Advice, yet no one listened and product manufacturers were too busy saying “don’t blame us for our GFC sins it’s those unethical advisers.” Now fast forward 10 years and they’re wondering why their inflows are down.
Over regulate to Death. RIP Financial Advice.
Another great stat, Financial Advisers have to report too and be regulated by 8 (yes EIGHT) different bloody Government bodies that double up, over regulate and don’t talk to each other to sort out the complete and utter load of compliance red tape BS that Advice has become.
REDUCE OVER BLOODY REGULATION SCOMO AND FRUDENBERG. !!!!!
Don’t leave it to ASIC to improve access, so far they have managed to push the cost of advice up and the remuneration ( LIF for example) down . One wonders how anyone can afford advice in a post FoFA world.
Absolutely the case
Well, what do you know… exactly the same situation as the UK. HM Treasury there thought that all of their ‘fixes’ for the advice sector would increase competition, improve transparency and help consumers negotiate fees. Now the advice gap there has widened with advisers (IFAs) largely withdrawing from the mass market, increasing fees and only serving the wealthy.
if the ignorant politicians (it is not ASICs fault, they were told to sit back, then to bite… next rollover?) should base policy on research and truths… not ideology and populist views… read this and broaden your perspective with true academic research (not political blather)
https://www.emerald.com/insight/content/doi/10.1108/JFRC-08-2015-0044/full/html
“Whilst enhancing professionalisation and reducing commission bias, the RDR is failing to address the needs of many financial consumers – identified by many as an “advice gap”. It is argued that the focus of the RDR, and previous reforms, on addressing market failures may be misplaced.” Patrick Ring
Also by the same author;
https://theconversation.com/giving-people-extra-responsibility-for-pensions-is-a-disaster-in-the-making-65699
Same story as Australia, only fast forwarded a few years.
Yes. Exactly right. We used FOFA as an opportunity to turn off fees of smaller clients. FOFA has legitimately allowed us to exclude smaller clients from our books.
This opened up room for wealthier clients. As as result our income increased substantially. It has been an excellent outcome. It is not our main role to be a charity to the less wealthy.
The government can set up their own advice service for that segment. We also do some pro bono to give back to the community.
The sooner the advice community realises we are now similar to lawyers and surgeons the better.
Shock horror! All this red tape and compliance has done is massively inflated the cost of advice. It will only get worse as they keep punching down on us. You can’t have it both ways guys.
I couldn’t agree more. Post FASEA we will have professional and ethical standards on par with the most trusted professions. It’s time to do away with SOA’s. They are lengthy, costly pieces of nonsense, with little value for consumers. I don’t see doctors, accountants, pharmacists or lawyers being forced to produce these ridiculous reports. If this absurd red-tape was abolished, we could drop our fees and start working on an hourly rate. Suddenly the masses would be able to afford our advice and the community would benefit enormously.
Possibly the best summary of advice in this country at present. Those that most need the advice are being regulated out of it, and will be forced to turn to ‘sausage shop’ robo to get advice. It will be bland, unresponsive and they will drop it until hopefully one day they can afford proper advice from someone they can form a relationship with.
That cant be true! All of the regulatory changes have been implemented to improve customer out comes and make FP more accessible. Are you saying the opposite is true??? ( I really wish there was a sarcasm font)
If you think FOFA added cost, wait till the FASEA code become law next year!!!!
This unintended consequence was flagged by many practitioners and it was duly noted and thrown in the bin by those politicians, regulators and other activists that know best.
I think the saying is “I told you so”.