The economic impacts of COVID-19 and the early release super scheme are highlighting the fact that consumers are more in need of professional financial advice than ever before. But the massive costs of compliance mean they won’t be getting it – and that could have nationwide consequences.
“Those consumers who have less savings have a greater need for advice going forward than those with greater savings, but they will not be able to afford it,” AIOFP executive director Peter Johnston told a virtual meeting attended by federal MPs.
“Considering the nation’s total welfare bill is currently 35 per cent or $191.8 billion of government total spending pre COVID/NDIS, future taxpayers need a well-advised population to mitigate these financially frightening circumstances going forward.”
The AIOFP holds that the cost of advice has tripled over the past three years to $4,500 per single person or couple to cover the compliance regime, with around 50 per cent of that being paperwork duplication and other costs that advisers have no choice but to pass on to clients.
Nathan Rees, former NSW premier and assistant national secretary of the Financial Sector Union (FSU), echoed the points, saying that the “onerous nature” of the compliance regime means there will be “a dearth of good quality professional advice for ordinary Australians”.
“What that ultimately means is that those people who remain providing advice will gravitate towards the high-net-worth individuals, and mums and dads who have either just taken a redundancy or who have retired from work at a point in their life when they’re a) elated at the prospect of retirement, b) wealthier than at any other point in their life, but c) at the most vulnerable point in their life won’t have access to a pool of advisers who can give them professional steer,” he said.
“This is looming as a macro policy issue for the nation.”
And while the findings of the royal commission continue to weigh on the reputation of the financial advice industry, Mr Rees believes the regulatory response has gotten out of control.
“There’s been rogue operators,” he said. “There’s no question about that, and we need to run them out of town. But the pendulum has swung too far the other way.”
Stop complaining, too many bad advisers still providing advice “AMP” and “MLC”.
Look mate, it’s pretty much the Executives at both those businesses you named that is the problem – not the Advisers.
Spot on. Many of the bandits who created this disaster are still plying their trade…at the same institutions without any consequence whatsoever.
Go away you flea
The whole Advice process needs a review. They need to question the role of Licensee’s, and whether we should be operating under a single ASIC authority with standard compliance and templates across all planners. There should be less emphasis on presenting advice documents to clients, but more emphasis on quality client conversations and education (financial literacy), where the reasons for advice can simply be noted within an Advisers client file and not presented in a 100 page document that is only about protecting the licensee. The system needs to cater for quick, easy advice, that can reach more of the general population at an affordable rate.
Correct:
The average Australian can no longer afford quality, meaningful advice that serves also as a source of education and guidance to assist them in making the right decisions.
Advisers are being told they only should have a certain number of clients ie 100 to 150 max.
If that is the case, then an annual ongoing average fee base of $3500 to $4000 per annum to deliver client reviews, updates and portfolio monitoring, ad hoc administrative services throughout the year, insurance cover alterations or claims management, nomination of beneficiary changes or confirmations, pension payment adjustments and Centrelink advice, salary sacrifice calculations and contribution strategy, inheritance advice, estate planning advice, deb reduction and cash flow strategies etc etc etc.
Plus all the duplicated compliance documentation throughout he year has driven the cost of advice through the sky.
Clients want to be able to sit and talk with someone who understands them, who has rapport and trust and who they know will have their back when they have a change in their life, are approaching retirement, when they lose a loved one, when they are confused and don’t know which direction to take.
In the end, they want someone who they understand and they know who cares about them as people first.
Unfortunately advisers are no longer able to spend time with clients who are no longer cost effective or potentially have no potential for covering the compliance costs in he provision of advice.
This will and is resulting in a growing volume of people who will never seek or be provided the advice and guidance to enable them to obtain a clear plan and strategy.
When all said and done, the regulatory changes in the last decade in relation to financial planning advice and risk insurance advice have all been underlined by the mantra of “enhanced consumer outcomes”.
Whilst every profession and industry must continue to evolve and ensure it is on track, it is counter productive to implement regulation for regulation sake when it ends up significantly reducing the numbers of people who can access advice and for those who need these services most.
I don’t know why politicians have no understanding of the concept of unintended consequences? Its my guess that they still live their lives entrenched in planning only for the next electoral cycle and bugger the future…..
Nothing we haven’t known since FDS/OGS came in really and it just keeps getting worse. All the higher level admin ppl are going into compliance as they are paid a fortune by the banks. Wait til you all do the ethics course – compliance on steroids and I can’t see it stopping any time soon. Whilst there is money to be made by education institutions and FASEA and ASIC look like they are doing a good job – I can’t see anythings swinging the other way.
And I’m here to tell you as an adviser for over 10 years…this is spot on. Compliance – and the additional costs Licensees are now imposing on their authorised reps to cover the massive over-compliance costs are exactly what’s driving me out too. Its bloody ridiculous what we have to do now and the idiots at ASIC who think they’re doing the nation a favour, are doing the exact opposite.
how about we focus more on the education standards of those who are implementing compliance, or audting files or managing planners and god forbid the liscencee. How about we allow advisers to participate more in these decisions instead of being at the wim of liscnecee standards that are decided and implemented and monitored by people who are not expected to adhere to the same education standards and have little to no experience in actually implenting any of these within a client facing environment
Good point.
Current Head of Advice Quality – AMP Australia, based in Melbourne, holds a Bachelor of Arts, Politics & Sociology.
Plenty more examples to chose from!
current head of advice quality with NO financial planning education, yet all advisers must meet a standard higher then his/hers and yet they are setting the standards of Advice Quality at one of the Nations largets AFSL!!!!!! Anyone else seeing the absolute stupidity in the current system. THis person does not have the education standard to sit in front of a client yet sets the bar for advice quality??!!! Please explain, and yes as you say plenty more examples.
If you google ‘Head of Advice Quality – AMP Australia’ the name of the person will come up.
Then see LinkedIn profile, Education.
– Not on the FAR
– Not registered with the TPB
– Won’t be obligated to sit the FASEA exam
Nice job if you can get it.
What a refreshing attitude from Nathan Rees. In stark contrast to the “all advisers are criminals” attitude of ASIC, Choice, and ABC.
The only criminals are the left winged dopes from Choice, ABC and ASIC