On the latest episode of the ifa podcast, shadow treasurer Angus Taylor criticised the Labor government’s role in keeping the cost of advice high and their handling of the Compensation Scheme of Last Resort (CSLR), which has only worked to drive the cost higher.
Started as an initiative by the previous Liberal government coming out of the Hayne royal commission in 2019, the CSLR will now see the advice industry front an estimated $18.5 million bill that will leave advisers out of pocket approximately $1,200 each.
When asked to comment on Labor’s roll out of the initiative, Taylor said “it’s absolutely not the way we anticipated” when it was first discussed.
“That’s not what we saw the pathways being, but that’s a big impost to an industry that’s struggling right now, and that we need to get back on our feet. So no, this is exactly the opposite of what we expected. We’re deeply concerned about it,” he said.
Since its announcement, the advice industry has been vocal about their concerns regarding the added cost of the levy, particularly as they are footing the majority of the $24 million total cost of the CSLR. Taylor said the amount placed on advisers is an issue and will impact the industry’s ability to recover from the challenges of the last few years.
“We’ve heard the concerns of the sector about how this is playing out, and the fact that so much of the burden is being put on the financial advisers, I think, is a very significant problem,” he said.
“I mean, that’s a big amount of money for an adviser to pay. It’s a much smaller amount of money to the financial services players, the big financial services players, but it’s a big amount of money for the advisers, and it’s just not the way to get the sector back on its feet.”
Australians struggling to afford advice
With so many Australians expected to retire over the next decade, the need for advice grows but the high cost is making it unattainable for many, particularly during a cost-of-living crisis.
Taylor argued that excessive government regulation is impacting the advice industry’s ability to provide advice and the QAR reforms are an opportunity to correct this, but the government does not seem in a hurry to address the issue.
“We are entering an era where so many Australians are under-advised. They’re also under-insured and underbanked increasingly, too, by the way. And a lot of this is because of layer upon layer of government regulation,” he said.
“The Levy review is an opportunity to scroll some of the worst of that back and open the sector up to get on with doing what it does best, which is doing what most advisers have always done well, which is just to give quality advice.
“And we need more of that, not less, and we need it urgently, but there’s no urgency coming from the government in dealing with that. And that is of great concern to me.”
Taylor added that the high cost of advice is driving many to look for alternatives, with some seeking advice on social media in an act of desperation.
“We need more advisers advising more clients, and clients desperately need that advice. We’re getting to the point where the best advice people are getting is from TikTok. That is not advice,” he said.
Despite the continuing concern about the high cost of advice and the significant demand from Australians to be able to access it at a more affordable price point, the added costs being imposed on the advice industry has only hindered efforts to lower the cost.
With the ASIC levy freeze being lifted and the CSLR now being imposed, at a combined cost of almost $4,000 per adviser this year in levies alone, many are left wondering how the industry can be expected to reduce the cost of accessing their services.
When posed this question, Taylor responded: “Well, you can’t, and this is the problem.”
“We need innovation in the advice sector. That, I think, is coming, and lots of players are actually doing that, but that’s got to allow for a range of models from more expensive, higher-touch models that some clients will want,” he said.
“And there will be many clients who are happy with a much more basic offering because they’ve got a much less complex financial situation, and you need to have that range, but you can’t have that if you’re imposing these sorts of costs. We think it is slowing down the sector, getting back to where it needs to go, and we’re deeply concerned about it.”
To hear more from Angus Taylor, tune in here.
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Hello client we have to increase your fee this year due to our ongoing compliance costs having continued to increase sadly. This has been caused directly by both the current government regulations as well as some new compliance costs they have imposed since we last met. The current minister for financial services Stephen Jones has spoken for some years now about fixing what he calls a hot mess but to date he has done nothing. Client if this increase makes you feel unhappy in any way then please let Stephen Jones know and also advise that you intend not to vote for his party at the next election. Thank you.
How do we as a profession hold Taylor and his cronies accountable to their promises if they get into power again? They made the mess … will they fix it? Or just tell us lies again and play us for fools. This is from someone who was once a very loyal liberal voter. They turned on their consituents …. And need more than just lip service.
100% Agree !!!!!!!
I am deeply divided. Taylor was a key part of the political party that created the “hot mess” that is at the root of all the current problems. Why is he or anyone in the opposition going to fix this? I don’t trust any of them.
The RITC rebate is going soon! This needs to be reported on as it adds to the cost of advice just like the CSLR.
Exactly, why is this 7.5% Government GSTax increase to Advice Fees not Getting more publicity ????
After 9 years of Adviser Killing Frydenberg its going to be real hard to believe Taylor & the LNP.
It abundantly clear that the hope of fixing the Hot Mess for Advisers via Jonsey & ALP was a pre election bunch of LIES, LIES and MORE LIES.
So where too from here ?
Regardless of LNP or ALP it is also so obvious ASIC, FARSEA, APRA, Treasury etc are full of the Adviser Killing mentality and this MUST change.
Clean the Canberra Bureaucratic Swamp.
Yes, Frydenberg made some massive mistakes by adopting ALL of the Hayne RC recommendations. Even WA Liberal Senator Brockman highlighted in his speech that NEVER has a Fed Govt accepted ALL recommendations from a Royal Commission (except Hayne). The result? The loss of 14,000 advisers, which is creating the massive reduction in insurance cover being written. Reducing the amount of CSLR is necessary, but eliminating the insane ANNUAL Fee Renewal Forms (that don’t exist in any other nation on earth) is a far higher priority.
“We need more advisers advising more clients”
This should have been the goal all along, but instead unqualified, and conflicted pseudo advisers was recommended.
This was the mantra Bernie Ripoll espoused…that got hijacked..
While I am typically a Lib voter, I can’t help but be skeptical given their complete lack of care last time they were in power. I wonder if they’ll actually do anything to assist us as a profession or as a business sector if they do regain power or if we’ll have a tragic repeat of the last incompentents
No acknowledgment that his party introduced the problem in the first place? A bit rich to be throwing stones at the ALP when you open the door from them to use CSLR and other levies to push their union fund masters agenda.