We are heading into an exciting phase of transformation and growth for the delivery of quality of financial advice to consumers and the recent release of Treasury’s Quality of Advice Review (QAR) proposal paper is a positive roadmap forward for the industry.
One example, simplification of the FDS requirements, will make a substantial practical difference to the cost and complexity of delivering advice. There is of course understandable nervousness amongst advisers and licensees around how the overall Proposals work in practice, particularly after years of embedding overly prescriptive rules and regulations.
But for many advisers and licensee businesses, it’s not the main game. Most have now embedded the new rules into their operating environments, come to terms with the unreasonable complexity and focused on working out how to run their practice more efficiently. At the same time, they are enjoying significant demand for their services, albeit challenging by finding the staff to keep up with the work.
Advice complexity and consumer access to quality advice will begin to improve in the coming years, with the positive support now being received by the government. But in the meantime, we’ve all got businesses to run and challenges to work through. The real opportunity is to focus on partnering together to transform the cost and efficiency of advice so advisers (and technology) can serve more consumers. Licensees and service providers are stepping up to help solve some of these issues and partnering with advisers to pursue the opportunity, in an environment of positive change.
Scale creates capacity to invest
The current environment of growth mixed with complexity is leading to consolidation across all participants. This is a good thing. Many advice practices remain small and it is these practices which are mostly impacted by the lack of industry infrastructure to support them. They need scalable service providers to help them run and grow their practices. Historically, it was the larger institutions that provided the infrastructure framework which practices and licensees could plug into. With the departure of most large institutions, its left to the rest of us to invest in this problem.
Mid-tier licensees are building out service platforms
Building scale requires a capacity to invest, and when used to deliver quality services more efficiently, creates a net benefit, one which advisers will only pay for when they see value.
As a service platform, we see the gaps in advice practices and it goes far beyond licensing. Practices require a flexible collection of services so they can ‘plug and play’ to support their value proposition and client base. This is great for advisers, but is also great for the service providers, where licensing remains a challenging cost recovery business model for many.
The industry is already working together on a program of positive change, focused on building a strong profession and services infrastructure that, one day, leads to many more consumers accessing quality advice, whether it be via a human or digital platform. This is the tangible opportunity that sits before the industry today, and one which service providers will have an important role to play to help licensees and advice businesses build the scale to help achieve this goal.
Nathan Jacobsen, CEO, Diverger
“One example, simplification of the FDS requirements, will make a substantial practical difference to the cost and complexity of delivering advice. ” ….hilarious exaggeration of a little carrot…..you still won’t be able to get the form signed a day before the anniversary date…..you’ll still have to send those forms out in bulk or some other standalone process. Still need to know renewal dates, renewal periods and anniversary days. The Super fund still needs a process to obtain members’ consent. You’ll never be able to just hand a form over during a 12-month window and say you’re paying me $4,000 last year and next you’ll be charged $4,000.Not such a substantial difference to me.
I have just worked out that I have enough to retire now at age 60…and funds to last through to 100 and retain my home. Reckon there must be more of us who haven’t done this exercise in a while.
Then I can be done with all of this political interference, lawyer interference, ASIC interference, and yes, I am feeling this way despite being fully qualified to carry on beyond 2026.
This QAR isnt going to fix things, or make things better for advisers, and then we will all soon be slugged with the compensation of last Rort (Resort)…
Maybe I’m just over it all?
You and me both. The inmates are running the asylum.
If you can afford to retire then go, there is no benefit in staying. By the time all the details come through this will only be another level of complexity, like every other change in the past decade.
“They need scalable service providers to help them run and grow their practices. Historically, it was the larger institutions that provided the infrastructure framework which practices and licensees could plug into. With the departure of most large institutions, its left to the rest of us to invest in this problem.”
Smaller adviser practices could automatically add 10-20% profitability if they were allowed to operate without the need for an AFSL. Which other profession has an AFSL structure? None. Why do Advisers need them? They don’t.
The way for retail advisers to “serve more consumers” is to eliminate the ridiculous Annual Fee Renewal Consent forms that do not exist in any nation on Earth, apart from Australia. Until that happens, a million consumers will remain unadvised.
Agree, I have no issues with getting consent annually…..that’s easy….. it’s the stupid process of anniversary dates, renewal periods, renewal dates, and fitting a form in to fit that. An over-complication of what should have been an easy process.
The only feasible way to do it is to Opt-out if you no longer want to pay the fees you agreed to pay. Opting in every 12 months just creates an expensive misunderstood barrier that doesn’t accomplish what it’s set out to.
“…that doesn’t accomplish what it’s set out to.” You sure? It has certainly slowed down Financial Planners – how many clients can one Financial Planner now manage? Meanwhile there is a review misleading titled “Quality”Advice Review – appears to me to be an exercise in allowing Product Manufactures the ability to provide “Better Advice” to sell and retain product – and charge across the membership – no Annual Opt-in as there will likely be no requirement to provide the member with anything for the fee charged – and no conflicts – seems that does not matter now either?
Its very simple. If no other nation on earth has “Annual Opt In” & none of the Super Funds have “Annual Opt In” for the millions they deduct from their member accounts for “intrafund advice” without any consent, then there is no basis for such red tape for retail advisers here either. The Annual Consent process has been purposely designed to ham-string retail advisers. It is blatantly anti-competitive red tape & must be completely eliminated.
The QAR discussion paper does not address the multitude of issues facing financial planners providing personal advice to retail clients, and in particular does not even mention changes to the FASEA Code of Practice (Code).
It appears that the QAR has missed the Code in its entirety, and has become fixated on making changes to the ‘best advice duty’, seeing it as a “fix all” solution, which it may well be for the institutions and superannuation funds. It certainly does nothing for the serious personal retail advice providers, that is, not without fixing the Code.
We as an advice group have no real issues with ‘best interest’, nor do other forward looking advice AFSLs and compliance people in this area of the advice industry. This of course ignores institutions and superfunds, which clearly the QAR appears to be concentrating on.
There are many issues with the Code but there are three (3) seriously flawed parts of the Code, causing real issues for advisers who provide personal advice to retail clients:
• Standard 3: conflicts, should point to the law. Every other profession (and financial institution) can deal with conflicts under the current laws, but financial advisers cannot. Allow us to manage our conflicts as do lawyers and accountants. (How will changing “best interest” fix this?)
• Standard 5: It is not possible to ‘ensure’ that the client understands all of the advice. This is not a requirement for doctors, or lawyers or any other profession. That is why they are engaged, because they are experts in their field, and you pay for their advice. Advisers have no way of guaranteeing, not without the client taking some formal education, that they fully comprehend the finer points of the advice. An adviser could spend hours, days explaining structures and product complexities and years later a client can make the statement “I didn’t understand”, and all the file notes in the world will not stop AFCA finding in the favour of the client. (Again, best interest does not affect this part of the standard)
• Standard 6: Take into account the broader affects of advice long term. That is, consider things that may arise all the way down the line including considering their children? “Best interest” here isn’t even considered.
The law doesn’t consider, nor does it allow a financial planner who must provide advice under the Code, to provide true limited advice, that is, not without considerable risk.
What is going to be done about the Code, how is the QAR going to affect this piece?
The FASEA code is outside the terms of reference for the QAR. Next steps on the code would be up to the Minister, not Levy.
I am fully aware of this, but the Code reflects the law as it stands for all of us who provide retail personal advice. Therefore it does not consider the serious financial adviser. Unless you provide general advice, which under the QAR, will apparently be scrapped. Now consider that for a minute, scrap ‘general advice’… that will mean anyone providing financial ‘ADVICE’ will be subject to the Code. Come Levy, lets get those big institutions back in to provide any old financial product they want to flog because there will be no laws restraining them, and they won’t have to contribute to the fund of last resort either. So as I have said, nothing will change for the financial adviser until this ridiculous piece of legislation is fixed, and its not in the banks interest so it is unlikely to happen.