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.”
If you do the right thing in the first place, this wouldn’t be happening.
Service clients better with more honesty. Simple
Does this mean that Jesus has come back since he was the last person who was perfect (allegedly)
What do you assume we have been doing up until now ? Yes it is quite simple, Clients stay and refer clients if they are serviced well and you treat them honestly. We have been doing this for decades.
The over regulation will come at a huge cost. It provides opportunities for ambulance chasing legal firms to pursue claims they now they will win because compliance with every piece of red tape is impossible.How hypocritical that the Royal Commission being led by a lawyer who criticised the financial advice industry for its lack of professionalism ( despite no experience within the industry ) yet his actions have and will lead to a bonanza for unscrupulous legal firms to mount class action after class action and provide them with their own gravy train. Where is Hayne now in standing up against the gravy train he has set up for these legal firms ? The cost to business will be huge to cover the class action risk. Why was a lawyer given so much power ? The implications have not been thought through. Huge mistake.
Even if the surviving advisers have good intentions and want to serve all clients, they will not be able to provide personal advice at a lower price than it costs to provide the advice, without their businesses going bust. They constantly face a changing regulatory environment and the risk of clients suing at the drop of a hat (even frivolous claims can financially damage a small business).
So unless some useless red tape is removed, regulators focus on big risks and not immaterial stuff and complaining clients have to pay some amount if their claim is found to be frivolous, in order to deter these types of claims, it will be impossible for advisers to provide “affordable” advice.
I could not agree with this comment more – you have hit the nail on the head, it’s time the ambulance chasers were stopped and the PI insurers start standing up to AFCA where the proper procedures haven’t been followed or AFCA have sided with the client despite obvious facts that show the adviser was not in the wrong…
What i could never get working in the bank was bank staff being about to sell super funds under the guise I general advice yet this was stopped but we have industry funds reps out doing the same thing without an advice license yet nothing is done.
Advisers that are giving advice on regulated super and pensions funds shouldn’t have to do an SOA just a clear benefit page why its in the clients best interest and disclose of all fee’s and charges with a signature page without the all the rubbish discloses we have to put in because a lawyer at some point has sued an adviser over something.
Union funds have unofficial regulatory immunity that allows them to give dodgy, unlicensed licence. So do accountants and real estate agents.
That would create a race to the bottom on fees as the basis for switching. Imagine you have a client walk in demanding a non-lapsing BDN, then the Code of Ethics kicks in and you have a duty to find out more about their estate. Aaaand here we have a 100 page SoA!!