The recommendations to change the regulatory framework in advice put forward in the Quality of Advice Review (QAR) proposal paper will help stop declining financial adviser numbers in Australia, a research firm director has suggested.
Last year it was reported that the number dropped below 19,000 and is predicted to reach 13,000 by the end of 2023, while a report released this week by Investment Trends found that one in four financial advisers are expected to leave the industry within the next five years.
Speaking to ifa following its release, Investment Trends’ research director, Dougal Guild, revealed that of the advisers suggesting they intend to leave the industry in the next five years, a quarter of those are aged 60 years or older and some are simply moving into retirement.
“Generally however, advisers have cited ‘compliance burden’ as the main challenge they deal with in their business for many years now, closely followed by ‘regulatory change/uncertainty’,” Mr Guild said.
“Administering fee disclosure and client opt-in was cited in our latest survey as a specific example of this ongoing regulatory change and compliance challenge. Ultimately, this leads to an increase in the cost of providing advice and an inability to provide that advice to those less wealthy clients who need it.”
Mr Guild referenced the recently-released QAR consultation paper, in which Treasury wrote that “it is clear the current regulatory framework is a significant impediment to consumers accessing financial advice” and that “the purpose of the review is to consider whether changes should be made to the regulatory framework applying to financial advice to improve the accessibility and affordability of financial advice”.
“Although the focus of these comments relates to consumers accessing advice, the flip side of this is that proposed changes to the regulatory frameworks should also make it easier for advisers to provide that advice to consumers,” Mr Guild said.
In the paper, QAR reviewer Michelle Levy confirmed she believes changes must be made to the regulatory framework and put forward a number of proposals, including that the financial services regime should regulate the provision of “personal advice” which should be “somewhat broader” to ensure clarity.
Submissions for the QAR consultation paper are now open and will close on 16 September 2022.
Meanwhile, Investment Trends’ 2022 Adviser Business Model report found that 37 per cent of advisers intend to switch licensees and 70 per cent of those suggested they’ll switch to a self-licensed model. It was also reported that that the total cost of providing financial advice to the typical client has increased from $2,850 in 2020 to $3,280 in 2022.
You cannot provide financial advice if you do not have an open APSL and you are always conflicted if you work for a product issuer.
Anyone claiming to be a financial adviser must be self-licensed, have an open APSL, and cannot have anything to do with a product issuer. Anyone who cannot satisfy these very simple requirements is a salesperson.
odd how the labor government forced the liberals to implement all the royal commission measures only to be the ones now trying to undo them.
Opposition can’t force the government to do anything. The Liberals had majority government and Frydenberg came out saying all recommendations would be accepted even before the recommendations were released.
This is 100% Liberal.
I don’t think so. You won’t need qualifications to give advice if you work for a product provider and don’t receive a fee by the client. No need for advisers anymore.
Tell me this. How will a Labor Government let this go through ? It won’t.
Labor will love it – Super Funds able to provide in house Financial Product advice to members during accumulation and at retirement – no BID, charge all members, no SOA’s – what is not to like for Labor and Industry Super? Consider yourself told.
Have you actually read the proposals people. READ THEM. DONT BE LAZY! Your average bunny st industry super will be able to give advice without the qualification or professional requirements requirements YOU have placed on you. This is the same for robo advice. They will ALL be able to give personal advice without best interest so long as the super fund or rebofund organisation deem it appropriate.
Lower quality personal advice by super fund sales reps and call centre staff is only one proposal out of 12 however. There is also another bad proposal aligned to this one, which effectively gives open slather to intra fund advice. But the other 10 proposals are good.
I agree it’s important for all advisers (and so called consumer associations and so called finance journalists) to properly read the proposals, as there has been a lot of misunderstanding and misrepresentation. Then lobby hard to support the 10 good proposals and ditch the two bad ones.
Spot on – really not sure why people are missing this point – perhaps they are all busy congratulating themselves becoming a profession. “Fiddle while Rome burns” comes to mind.
Where was the part Michelle recommended the end of AFSL registration for Advisers? Self Licence should be the way forward.
No…they won’t.
The depth of damage done to advisers over such an elongated and protracted time frame is not easily reversible or diluted.
The damage has been done.
While changes to processes may well enhance the advice process the emotional stamina of many has been destroyed.
QAR will do very little for advisers, except set the industry up for the next Royal Commission.
For Financial advisers, they recommend dropping the prescriptive nature of the SOA. Great, but the fact remains that advisers will still need to provide documented evidence why they made certain recommendations – love the fact it won’t be in a set format, but the work will still need to be done, otherwise AFCA will come knocking on your door in 15 years time.
It also recommends changing the FDS requirements. Seriously, I am staggered that advisers think that administering fee disclosure and client opt-in is the biggest challenge. Is it really that hard to be upfront with clients and say I have taken this much money, but have provided you with X, Y and Z…
However, the next Royal Commission is going to come from Digital Advice. Please, just change the name to what it really is, Digital Sales Funnel. Having someone fill in 10 questions and then the computer spit out the recommendation that you invest in their balanced managed fund is [b]NOT[/b] advice. It is part of the sales process.
I think the issue with the FDS is the duplication if an SOA has been provided on an annual basis.
Just another academic with no idea. With a quarter of advisers leaving in the next few years, and with next to no new entrants how will removing bad legislation fix anything. Even if red tape is removed, which probably won’t happen, no one will want to enter the industry while ASIC is still around chasing heads on sticks.
Seriously no SOA’s try getting PI insurance and in the same breath state you no longer do SOA’s for clients ! You will not be offered PI and so wont be able to practice end of story !
No prescriptive SOAs and not requiring any documentation are two very different things.
Get back to basics – ASIC approves PDS’ within acceptable fee ranges and as long as you use the platform/product that is ASIC approved there is no super switching, no like for like, no comparisons and the result: SOA’s cut by a third. Why should I justify to the client why they should switch If I want to operate my business on one platform for efficiencies to the practice that trickle down to clients anyway? Obviously what I use to hold clients money I see benefits in and will promote these benefits to clients e.g. family linking fee discounts, choice etc.
so product focussed.
Also, I don’t think ASIC actually approve PDS.
“Why should I justify to the client why they should switch If I want to operate my business on one platform….”
Seriously. Are all super funds equal? Are all investments the same?
You are there to work in your client’s best interest, not for the client to adapt to whatever is easiest for you.
BID is about to become yesterdays news – but you hang in there.
I disagree. QAR will not stem the outflow. Scrapping FDS (with a quicker annual consent form) and TMD reporting, while a good idea, will essentially get us back to where we were on 30 June last year. No SOA’s? Sounds great in theory, but does anyone actually think licensees will go for this? They are so frightened of ASIC, they will force us to write them anyway, or something similar with a different name, to prove they are enforcing the totally insane FASEA code.
Yep, bad legislation is only half the problem. Bad regulators is the other half. QAR will go a long way to fixing bad legislation. But while we still have biased regulators hellbent on misusing their power to indiscriminately persecute advisers, advisers will be overly conservative and/or seeking to exit.
By her own admission, Michelle Levy doesn’t even understand the problem of bad regulators, let alone have a solution for it. The only solution is a massive personnel cleanout and cultural realignment at ASIC, and the complete removal of financial advice from AFCA’s jurisdiction.
Nailed it! PI insurers will dictate to licensees’ what they need to do to fend off AFCA complaints and ASIC. Then the Licensee will impose their own restrictions on advisers.
They need to have every adviser self licensed! Why do we need licensees??
Giggity perhaps you have raised the most crucial point i was hoping Michelle Levy would raise – would advisers be better off licensed all through one body like say accountants – basically get rid of AFSLs .. I think you will find this is in the wind already … fingers crossed