Making sure the rich aren’t the only ones getting richer

The financial services industry is still too good at selling product and not good enough at sharing information. A regulatory framework that supports knowledge sharing and different advice models is what’s needed to improve financial literacy and drive growth.

Financial advisers should be leading discussions about the future of advice and the regulation of the industry.

Important issues that directly impact their businesses and clients, including adviser remuneration, advice processes and business models, are under the microscope again, as part of the Quality of Advice (QoA) Review.

Advisers need to ensure their voice is heard.


Fortunately, they’ve never been in a stronger position to positively influence public policy.

Advice has come a long way from its cottage industry roots when practices were small, fragmented and heavily dependent on product subsidies. From this weak position, manufacturers and their industry bodies took charge and framed discussions around their interests. 

But today, advisers are educated, articulated and respected. Many run large, sophisticated businesses.

They have felt the pain of ambiguous, impractical legislation and suffered the unintended consequences.

They must play a key role in educating regulators and policymakers, setting the agenda and proposing sensible solutions. They must be vocal about the work they do to help their clients plan for the future, manage and protect their wealth, and achieve their goals.  

If advisers don’t share their success stories, no one else will; leaving headlines about the likes of Melissa Caddick to fill the void.

A good place to start is by making a considered, fact-based submission to the QoA Review either directly or in collaboration with a professional association. 

Treasury is asking the industry for insights into the circumstances where people need advice but can’t access it, the barriers stopping them from getting it and how advice could be more accessible. It is asking for help to determine if alternative advice models are viable and if Fintech solutions can assist with the preparation, compliance and delivery.

Who's better placed to respond than advisers?

Most advisers are motivated by a genuine desire to help people; all people not just the wealthy. But the current regulatory regime makes it difficult, if not impossible, to profitably service people with relatively simple needs at an affordable price point.

As a result, businesses are turning away low-value (often young) people. Established advisers are selling longstanding C & D clients to focus on top-end clients with meaningful assets and the ability to pay sizeable ongoing fees. 

Advisers are knocking back opportunities to help the adult children and grandchildren of existing clients.

It is a terrible outcome for all. 

Advisers know that the foundation of good advice and smart financial decision-making is education and literacy. Product comes last, if at all. 

Yet the industry is still too good at selling product and not good enough at sharing information.

Financial advisers have a major role to play in improving financial literacy in Australia, alongside the government and education system. Children should learn basic literacy and skills at school and, ideally, at home. As people progress through life, additional resources and advice should be made available. 

For this to occur, the regulatory setting must enable the sharing of information in different formats. 

The painful truth is that most Australians don’t want the advice proposition that the industry is selling. That is reflected in the low number of people who receive professional advice. 

Affordability is only part of the problem. 

The main problem is the industry’s one-size-fits-all approach to advice delivery. 

If advisers want to help more people, they must take the lead in showing the government and regulators how quality advice can be delivered differently. They must build advice models and solutions that meet the needs of consumers.

Undoubtedly, technology will play a key role. Digital solutions are scalable and have the greatest potential to disseminate large amounts of information to the masses relatively cheaply. 

If advisers and technology providers don’t step up, 30 years from now - when the advice profession reflects on its legacy – it may only be that it helped the rich get richer. 

What it needs to be able to say is, we helped change the model to positively impact the lives of thousands of ordinary Australians too. 

Nigel Baker, founder, Scientiam; financial adviser, Arch Capital

Making sure the rich aren’t the only ones getting richer
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Neil Griffiths

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.

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