Australia’s third largest dealer group has lost around 100 advisers from its ranks in the past year as regulatory change makes business conditions for risk advice in particular “near impossible”.
Synchron director Don Trapnell told ifa the majority of the approximately 100 practitioners that had left the dealer group in the past year had chosen to exit the industry permanently, and had been risk specialists.
"Fortunately Synchron was able to attract around 80 advisers, so we only lost a net 20," Mr Trapnell said, noting that the group currently sat at 514 advisers and held a 2.4 per cent share of the Australian advice market.
But Mr Trapnell warned that the exodus from the advice industry more broadly was not slowing down, demonstrating the current regulatory settings were not fit for purpose.
"The ASIC FAR report of 7 January 2021 revealed that there are 3,038 fewer advisers taking financial services to Australian consumers now than there were 12 months ago, meaning the total number of advisers in Australia has contracted by 12.5 per cent," he said.
"That is a real problem for our industry."
Illustrating Mr Trapnell's point, a former Synchron adviser shared his reasons for leaving the industry despite being on the road to becoming FASEA qualified, stating that regulatory change has made providing life insurance services to his clients “near impossible”.
In a recent letter to Synchron management, Richard Dixon, of Queensland practice Broadwater Financial, said he was requesting to cancel his advice authorisation “with a heavy heart”.
“The level of compliance, education, costs and diminished income, along with the time required to meet my ASIC duties as a risk only adviser, have made it very difficult for me to continue providing this service and protection to my clients,” Mr Dixon said.
Mr Dixon, a qualified accountant whose practice also provides broader business advisory services, said he had a “full understanding of the need for compliance”, but that the current regulatory settings around insurance advice did not make sense.
“The best interests duty with regards to risk is flawed. We go through a fact find, research, provide an SOA with advice on a product that in most instances the client can’t afford. If there is a replacement product required it is even more difficult,” he said.
“Eventually we get to a point where we can provide some cover to the client. The result is a mentally drained and confused client that has signed all sorts of documents, and is probably thinking that they can’t possibly go through that experience again so chooses not to change their cover in the future when circumstances change.”
Mr Dixon said he had not been deterred by the professionalisation of the advice industry and had had his qualifications assessed by FASEA with the intention of progressing through his education pathway, but the lack of action from government and regulators to address out of control compliance requirements had eventually pushed him to exit the sector.
“I did keep my AR in place in the hope that ASIC requirements would change and the revenue earning model would change. I didn’t want to throw the towel in,” he said.
“[But] having had time to assess the situation over the past year I don’t see any changes on the horizon, hence my resignation.”
Mr Trapnell said the resignation of Mr Dixon and others like him revealed that current advice regulations needed to be more flexible to cater to different client services.
"Until we move towards recognising the differences between a risk adviser and a full service financial planner, we will continue to see risk specialists leave the industry, reducing the pool of risk specialists available to serve the needs of the consumer," he said.
"Attempting to force a risk adviser to be educated in the full service offering is akin to asking a plumber to learn how to be an electrician. Both trades need to know where they fit in the house, but neither needs to know how to build the whole house. Separating the disciplines will lower the regulatory requirements for a risk adviser and thus reduce the cost of advice for the consumer."
A former MLC Australia executive has become the national practice manager at licensee Wealth Market. ...
A new report has predicted there will be just over 13,000 advisers left by 2023, as the older practitioners who still dominate the industry retire in...
The managed accounts platform has signed on as a gold partner for this year’s Adviser Innovation Summit. ...