The government’s reforms to financial advice have achieved the opposite to their stated aim to make quality advice more affordable, with financial planning becoming an ‘elitist’ service that is accessible only to high-net-worth consumers, according to Connect Financial Service Brokers.
Paul Tynan, chief executive of the financial advice business broking firm, said with adviser numbers drastically falling in the past few months as a result of the incoming FASEA reforms, and increasing regulation making retail advice less scalable, financial advice would only be available to a select few in the future.
“The big end of town – the major banks, AMP and private banks – are moving away from retail advice as red tape and over regulation smothers the advice process,” Mr Tynan said.
“In addition, advisers are also leaving the industry due to personal circumstances such as age, education and health, leaving the remaining practitioners no option but to restructure their business models and only service clients who can afford advice.”
Mr Tynan said the proportion of new entrants to the industry in a post-FASEA environment was unlikely to make up for the current adviser exodus, as financial planning graduates would face a number of hurdles to work in the industry, including a lack of jobs as regulation hampered advice business growth.
“Graduates seeking a career as advisers are being confronted with a multitude of barriers to entry, whilst the challenges facing existing financial planning practices are acting as disincentives to business owners employing new entrants,” he said.
“The end result being new advisers entering the industry over the next decade will be a scarce commodity and planning practices seeking to grow will struggle to attract new talent.”
Mr Tynan said the exodus of advisers from the industry could not have come at a worse time as an increasing number of Baby Boomers would require retirement advice in the next few years, and Australian consumers in general now had the second highest personal debt levels in the world.
“Future financial viability in retirement is dependent upon not losing your job, not getting divorced or leaving the workforce to raise children, staying in good health, not being made redundant or becoming bankrupt,” he said.
“This is a snapshot of the debt rollercoaster that the majority of Australians will face – and why financial life skills are now even more important.”
Mr Tynan suggested financial literacy education may have a greater role to play given that professional advice would now be out of reach for so many, and that students should be compulsorily educated on topics such as the tax and super system.
“Financial life skills should be taught from year 7 to 12 to equip students with an understanding of financial services that in turn will support them for their working futures and beyond,” he said.
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