In the latest episode of the ifa Show, Neil Macdonald discussed the state of the advice industry ahead of the federal election this year and said there are reasons to be optimistic.
“I’m optimistic, particularly because I think there is a recognition on both sides of the government that there needs to be changes, and the pendulum’s probably swung a little bit too far,” he said.
“I think they’re looking for the associations and advisers to give them some constructive feedback on what needs to change and how.”
In December, the Labor Party declared that if voted in it would significantly ease the education requirements on existing advisers by axing the need for experienced advisers to return to university that the Association of Independent Financial Professionals’ (AIOFP) Peter Johnston praised as “common sense”.
Then earlier this month, the AIOFP launched its own “engage and enrage” campaign calling on financial advisers across Australia to put aside political differences in a bid to unite and incite change within the sector.
TAA also participated in the Financial Services Council’s (FSC) white paper released last October that outlined a framework that could cut costs to provide financial advice by almost $2,000.
Meanwhile, ASIC is set to release a Quality of Advice review this year.
“I think there’s almost an opportunity for the review that’s coming up to say, ‘Well, what’s working and what’s not? Is what we’ve got fit for purpose? Is it doing what’s it intended to do, or is it just creating paperwork and unnecessary cost?’” Mr Macdonald said.
“So there’s a lot of opportunities there to do something different.”
In the same episode of the podcast, Mr Macdonald called on advice industry bodies and associations to work together ahead of the election and for changes to current education requirements.
Listen to the full podcast with Mr Macdonald here.
Has it gone too far? The industry has needed change! It has needed to break free of so many of the “endorsed” bad practices. I’ve spoken with a number of very professional practices and they are saying that sure its been a tough time realigning but as a result their practices are growing. And as for the political parties each will puff up what the slow movers want to hear. But why should they want to seek more consultation when, if we consider so many of the comments from advisers over recent years, there is a rusted on cohort who just wants the “old times back” and minimum education. More professionally acknowledged qualifications lead to a better industry and better advisers. And all this stuff about my years of experience is all that counts is akin to allowing Bjorn Ironside to practice surgery because he knows how to chop and arm off in battle.
Do you truly think that not being able to provide limited advice (which is the situation if you follow FASEA’s rules and regulations rather than ASIC’s) and needing to give really long SOA’s helps the clients? Education is different from the requirements being unwieldy. Personally I believe the education requirements should proceed as previously documented but I have told numerous people looking to enter financial planning to look for other jobs because financial planning is dead.
I really think that using the long SOA argument has become a tired argument. Is the argument about clients understanding the document or it taking the adviser too long? Personally I think neither applies if an adviser has adopted the latest technology and has the correct customer proposition. Financial planning is not dead and I think advising people not to join this profession, when it finally becomes a universal profession, does not reflect well on industry participants.
I don’t really concern myself with other wanting to join this profession – but I definitely wouldn’t want my children to.
I heard the same thing when Video stores started closing….for a time that last surviving store said business has never been better because the competition is leaving….then it’s too late.
Any practice that survived is likely growing due to the massive exodus of advisers. But our cost to serve is through the roof and this increased fee structure is of no direct benefit to the clients. I would prefer to be able to provide much needed advice at a very reduced cost to what we need to charge now.
I really don’t know how you think the current regime is a good one.
Totally disagree. We may see a short-term exodus of advisers but that may not be a bad thing.
The cost to service the client is a marriage of technology and critical mass of the practice. The hard cold reality of the changing environment that financial services can no longer escape is that there will be “larger” professional practices and remote services be that robo advice, remote general advice and direct sales.
Change is a good thing.
Oh that old chestnut. I’ve been hearing that same rhetoric for well over 15 years. No software has yet come along that has provided these so called efficiencies. I use tech, xplan, xeppo, Astute Wheel, Midwinter etc etc to the fullest these packages allow and whilst they are better than nothing, do little to drive effecieinces in the current landscape that provides great cost benefit to the client.
This sort term exodus you are referring to, will see our numbers at about half of what they were two years ago. The only way that isn’t a bad thing is if you take a selfish view and see the opportunity that creates for you personally. This does not benefit the everyday Australian however.
Arguing positives for needing to employ economies of scale to be competitive harkens back to the shame shortfalls we are now realizing from the con of globalization. Sure a handful of people get rich, whilst the rest of us miss out on the benefits.
Please tell me what “tech” you are using because I haven’t seen one that does what you believe is the case and I’ve looked really hard. XPLAN is the best and it costs too much for what it does.
100% agree Jen! A prime example is when the risk insurance rules came in place on the 1 Oct 2021! Life companies had their biggest day of sales on Sept 30, record breaking and we don’t think there’s a churn issue????? Most life companies are barely hitting their targets now that advisers can’t replace policies!!!! Go figure
Do you have an data to show that churning was the reason for the uptick in Sept 2021?
I lodged more new business in Sept due solely to clients wanting to beat the deadline around soon to be lost quality of product, and it was not churned.
You lodged much since? It simply brought it forward
In other news, Industry Super increased FUM yet again as Financial Planning numbers decrease – those remaining on interested in prestige.
Personally, I think your argument is a short term one. All good and well to say ‘some very professional practices’ (although I don’t know what they says about the rest of us to be honest) are doing great now.
Is it really that good that ‘some’ do better at the the expenses of many others forced out Jen?
This might sound great now but when the exodus continues and the client numbers outweigh your ‘very professional practices’ who’ll inevitably fail to cope under the weight of demand, what happens to the clients who can’t get the advice and support they want? And going one step further into that, what also happens to the smaller clients of your ‘very professional practices’ who deem their smaller clients ‘unprofitable’ – which you know, WILL HAPPEN.
I find many sanctimonious comments like yours to always be about the now – not the long term sustainable future of this industry. There is SO MUCH genuine business for everyone in this industry yet the pigs with their head in the trough most often don’t see (or want to see) that. Its all about the ‘me, me, me’ and not setting up an industry that everyone who wants to thrive, can.
I could explain it to you but the reasoning and facts may be too difficult to understand. And please, my comments are not sanctimonious because i have a few decades of experience across this industry and are based, on sometimes difficult, undeniable facts. Seriously, I’m agnostic in this argument.
A lot of practices are going to grow to the benefit of the clients, many of who have been looking for a different ( or better ) proposition from their adviser. Another group of clients are going to get a more suitable and affordable proposition by using robo advice.
The bloody Pendulum has swing soooo hard & sooo dam far its done multiple loop the loops around itself in mass BS overregulation.
8 years of Adviser persecution from Frydenberg has been so costly.
Advisers need to show Frydenberg the door, time to go !!!!!!!!!!
Along with ASIC’s Ms Press, well past time to go.
It isn’t rocket science folks. It’s pretty obvious what is wrong with the industry. And so easy to fix ?!
And what is that ?
If you don’t know by now you never will…
I call BS on that. We have been unfairly targeted. I presented a SOA this morning which was 16,000 words – the client will never read this. There are rogues in every industry. A lawyer, doctor, dentist or accountant would do it on one page or verbally. Some of the fees these professionals charge are ridiculous and can’t be justified. Why go out by yourself or in a two or three planner business? You don’t make money. The overheads are just too high. Things always mean revert and I’m hoping our industry does.
Well said Geoff
How many thousands of dollars per day did the QCs at the Royal Commission charge us as taxpayers? But there’s no inquiry needed to justify these fees, as so many politicians are former lawyers.
Not on the Labor side they aren’t. I know the Royal Commission cost a lot but it was needed to finally expose the issues that have been hidden for so long. I’d call the cost an investment.
I think the pharaceutical companies would agree…since they seem to be running things these days…
Exactly. Who wins from a divorce proceeding? Only the lawyers. How about the likes of surgeons? They only give you a figure verbally and charge you like a wounded bull. We have to get the client to acknowledge our fees multiple times every year
“Some of the fees these professionals charge are ridiculous and can’t be justified.”? Be very careful of the glass house. But at least you have stand the reality that single and small practices don’t have a future unless they are prepared to invest – and the reality is that they don’t have the disposable funds to invest. And I really hope this industry doesn’t “revert” because most of the hard work has been done by the early adopters and those who can see the need for change.