It’s the best of times and the worst of times for financial advisers, with industry change set to shake up the playing field, according to HLB Mann Judd.
With financial adviser numbers continuing to fall in the aftermath of the royal commission and costs rising due to the new compliance regime, many Australians will miss out on financial advice. And with the complexity of the financial environment increasing every day, it’s more important than ever that they don’t.
“Good financial advice covers a wide range of wealth issues – super, other investments, interaction with tax, estate planning, cash flow planning, insurance needs…and so on,” said Michael Hutton, head of wealth management at HLB Mann Judd.
“While almost everyone has a banking relationship, they will no longer be able to talk to their banks for advice. Likewise, while superannuation funds are likely to be called upon to provide advice, this is likely to be general in nature, not specific, and limited to the superannuation side of a person’s wealth.”
As many banks shutting down their wealth management arms to mitigate risk, younger people and families are increasingly missing out on quality financial advice. While some believe that robo-advice could step into the gap – its low costs make it appealing to new entrants – Mr Hutton is doubtful that it can live up to its promise.
“I don’t know if it will ever get there,” Mr Hutton said.
“I think advisers bring a certain empathy to the client situation. There’s got to be intuition there, there’s got to be insight. And I’m not sure that technology solutions will provide that.”
But it’s not all bad news. As the industry begins to stabilise, the remaining financial advisers who have endured the new compliance demands will find themselves in a commanding position while being able to provide more affordable services.
“The industry is in a state of flux and for those of us who remain, the transition is not an easy one,” Mr Hutton said.
“The silver lining to this is that, with fewer advisers around, those that embrace the new regime and do it well are likely to experience increased demand and see their practices grow.”
However, there’s still a rocky road ahead. Financial advisers are not just dealing with compliance and disruption, but the lingering reputational damage of the royal commission.
“The events of the past few years mean that financial planners will need to work even harder to ensure Australians don’t miss out on the advice and assistance they need,” Mr Hutton said.
“The challenge for advisers is to find a way to repair the trust that has been damaged following the royal commission and show Australians the value of the advice they provide.”
Several firms have been impacted by the corporate regulator’s action.
Super funds must now have a retirement income strategy in place.
Vanguard has called for a complete overhaul of the advice industry.
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