In its submission to the Quality of Advice Review (QAR), Colonial First State (CFS) has argued that reform is needed if financial advice is to be available to the millions of Australians that would benefit from receiving it.
According to CFS, an unarguable trend is taking shape in advice with the number of advised customer balances under $150,000 halving in the past five years — from some 40 per cent in 2019 to less than 20 per cent today — while at the same time, the number of advised customer balances over $500,000 has more than tripled.
This trend has been further exasperated by a 40 per cent increase in fees associated with a statement advice to over $3,500 for the typical client over the same period.
“The scale of this challenge means it will not be solved by fine-tuning the existing regime. Without meaningful reform, increasingly only wealthy Australians will be able to access personal advice,” CFS said.
In addition to the rapidly increasing cost of providing advice, CFS explained that the current legislative framework has also contributed to the provision of financial advice that is no longer fit for purpose to scale different customer needs.
“For example, the breadth of information requirements and scope of research associated with developing and providing a Statement of Advice can sometimes provide clients more comprehensive advice than they need or want,” it said.
“Short-form, interim approaches such as the use of the Record of Advice have not been widely utilised as they were limited to narrow use cases and took a layered and prescriptive approach to determining whether they could be used,” it continued.
“Whilst well intentioned, the practical effect did little to address the costs and risks of providing financial advice. We have seen few examples of improved access to financial advice as a result of it”.
Moreover, CFS noted the challenges associated with a high discrepancy between the number of advisers leaving the industry versus those replacing them, which it said could be as high as around 6:1.
Should this continued, it noted, “the already significant challenges associated with accessing affordable financial advice are likely to be exacerbated”.
“These trends are disproportionately impacting on, and reducing access for, those with lower account balances and/or those who are seeking relatively simple and often single-topic financial advice. This often includes those with lower incomes and women who are less likely to have the financial means to afford financial advice under the current regulatory regime”.
As such, CFS is hopeful that the proposals put forward in the QAR are a “step in the right direction and deserve careful consideration”.
“This review provides a timely opportunity to rebalance the regulatory regime such that all Australians have the opportunity to access financial advice to improve their financial wellbeing”.
Ok, so I produce something, say a table crafted from wood using my skills and education. The wood costs me $2,000 and it usually takes me 20 hours to build…I elect to charge $50 / hr for my time.
So I need to sell the table for $3,000 plus GST…
Why should I sell my table for $2,000 so that someone who wants a lovely hand crafted wooden table but can’t afford one can have one?
Am I shunning “poorer people”? Or am I trying not to be poor myself?
The current labor minister has already stated in a webinar that ordinary Australians will be getting advice from a Super fund via the creation of carve-outs and concessions, and the 1% of Australians that are considered ultra-high net worth will be left for advisers to fight over. What is needed is concessions and carves out for all parties so it’s a level and fair playing field.
How about these super fund advisers be allowed to only deal with balances under an amount so the stuff ups aren’t that significant and let the professionals give proper advice over that amount. This previously happened at banks and does happening without lending at banks. Anything above a certain limit they can’t give any advice on at all.
Said ages ago when the compliance costs first started to ramp up – the government need to fill this void. Either themselves, or by reduced disclosure/reporting requirements. If the government want people’s lower balance super to last as long as possible, most will need advice to achieve this. It is choice the government has. And affects all Australians as the taxpayers will fill the gap for any pension shortfalls in the years ahead.