Paul Tynan, chief executive of the financial advice business broking firm, said with adviser numbers drastically falling in the past few months as a result of the incoming FASEA reforms, and increasing regulation making retail advice less scalable, financial advice would only be available to a select few in the future.
“The big end of town – the major banks, AMP and private banks – are moving away from retail advice as red tape and over regulation smothers the advice process,” Mr Tynan said.
“In addition, advisers are also leaving the industry due to personal circumstances such as age, education and health, leaving the remaining practitioners no option but to restructure their business models and only service clients who can afford advice.”
Mr Tynan said the proportion of new entrants to the industry in a post-FASEA environment was unlikely to make up for the current adviser exodus, as financial planning graduates would face a number of hurdles to work in the industry, including a lack of jobs as regulation hampered advice business growth.
“Graduates seeking a career as advisers are being confronted with a multitude of barriers to entry, whilst the challenges facing existing financial planning practices are acting as disincentives to business owners employing new entrants,” he said.
“The end result being new advisers entering the industry over the next decade will be a scarce commodity and planning practices seeking to grow will struggle to attract new talent.”
Mr Tynan said the exodus of advisers from the industry could not have come at a worse time as an increasing number of Baby Boomers would require retirement advice in the next few years, and Australian consumers in general now had the second highest personal debt levels in the world.
“Future financial viability in retirement is dependent upon not losing your job, not getting divorced or leaving the workforce to raise children, staying in good health, not being made redundant or becoming bankrupt,” he said.
“This is a snapshot of the debt rollercoaster that the majority of Australians will face – and why financial life skills are now even more important.”
Mr Tynan suggested financial literacy education may have a greater role to play given that professional advice would now be out of reach for so many, and that students should be compulsorily educated on topics such as the tax and super system.
“Financial life skills should be taught from year 7 to 12 to equip students with an understanding of financial services that in turn will support them for their working futures and beyond,” he said.
This industry is a corpse. Why any new entrant would want to waste their life studying to get into it and then jumping through hoops and red tape only to be persecuted by stupid lawyers, compliance dopes, ASIC, industry super, the government, consumer groups, FARCEA, AFCA and the rest is beyond me.
The fee level that best interest financial advice is heading towards is very high, and why shouldn’t it be. We have to study just as much as Lawyers, accountants, and most medical professionals. I don’t really see how the red tape can be cut that much and at the same time ensure adherence to best interest duty. In some ways we should thank the government. It is not up to financial advisers to work out how to give everyone access to financial advice. That is the role of the government. That is the reason Medicare and Legal aid exist for other expensive professions. Just realise that our industry is permanently transitioning to a different level and status. Make the most of it.
Compliance could be cut a huge amount Mike. With conflicts of interest banned under the FASEA code, there is no need to produce SOA’s. I don’t see doctors, lawyers or accountants issuing 65 page documents each time they give a consumer advice. If life insurance commissions remain, then fine, any adviser who doesn’t dial down, must produce an SOA. Same for advisers employed by a product flogger such as a bank or industry fund. Pretty simple. If you are worried about ensuring an adviser acts in the client’s best interest, why wouldn’t they act in a client’s best interest if there are no conflicts?
Only if we keep doing advice the way we have for the last 20 years! If we embrace technology and look to provide advice efficiently, a lot of the current cost due to inefficiency can be stripped out! But if you want to keep mucking around for hours with Xplan and paper based SOA’s – you will price yourself out!
Spoken like a software sales rep, pushing the magic bullet. I call that comment bullshit. Technology is not the magic bullet. We’re down to only two PI companies in a Australia, we’ve got ASIC adviser levies, TPB requirements, FASEA. Time to call a spade a spade and clearly state red tape and an over bearing compliance regime is preventing access to Advice. It’s time industry assocations, fund managers, super funds get off there backside and reduce business red tape…otherwise Australians will be getting there advice from call centres selling horse racing syndicates
It doesn’t matter what systems you use — ASIC come looking and you don’t have 400 pages of research then you are done and that 400 pages takes time and money.
Technology is as only as good as the information, and interpretation of the law, you put into it!
Told you so. Many advisers have spent the last 5 years trying to make it work and work with average Australians using technology etc but as it now feels like compliance people now outweigh actual planners it (advice) is only for the hi net worth. Thanks Paul for trying to bring this to the attention.
The Coalition Govt must be existing in a parallel universe when Treasury is ramming through all of its draconian adviser legislation (throwing thousands of employees in adviser offices out of work) while simultaneously announcing stimulus packages to create employment.
Hi Paul, I think the really pertinent question now still without an answer is if the aftershock effects of over regulation and compliance is so readily having detrimental impacts for everyone (business owners/planners/public/clients) then why isn’t there a response or reaction to it? Why do the same things keep getting raised over and over again and nothing gets acknowledged or addressed? Isn’t everyone just fed up trying to deal with ASIC and govt on this stuff? Instead we all just continue to spiral out of control down the toilet. I’m sure they will be full of empathy when standing over the industry corpse wailing “oh if only we could have done more to save them”…
Because no-one outside of our industry reads these articles and the government seemingly automatically sends any submissions from our associations straight to the “junk” folder.
Oxymoronic Pollies who want more of the population to receive Advice yet have continually added 20 years of freaking ever expanding Red Tape BS Regs, STRANGULATION AND COSTS.
Pollies & Bureaucrats have absolutely zero idea of real world application of their mindless never ending Red Tape parade.
While all this is true – is this news ? What did people think would happen ? We don’t make the rules – we follow them.
The stupid Pollies & Bureaucrats didnt think this would happen.
That’s the problem they have zero idea of real world application of red tape policies.
NFI !!!!!!!!!!!!!!!!!!!!!!!!!!!!
Nothing will change while there are votes in the reform process