Speaking at an adviser strategy breakfast in Sydney yesterday, Tria Partners’ Oliver Hesketh said one of the ways financial advice can become more affordable for Australians is through the corporate regulator reducing the regulatory burdens placed on advisers.
“We think the regulator needs to take a bit of a hard look at themselves,” Mr Hesketh said.
“Regulation is a big part of the reason why advice is expensive. Not everyone can afford the ideal advice that we offer.
“So we [are asking] if there is a regulatory framework that will allow for a different and more affordable advice model,” he said.
The whole industry, with the help of ASIC, needs to understand whether people are getting the right advice, if the right people are getting advice and at the right cost, Mr Hesketh added.
One way in which the industry should be looking to make advice more affordable is through a “regime” that allows people to more effectively shift from accumulation phase and into the pension phase.
“The problem is, the current regulatory settings are so tight that we aren’t offering solutions. For someone without advice, it is too risky [to make the transition], and advice, on the other hand is too expensive [for people to get help],” Mr Hesketh said.
“A lot of people take their money out of the system at retirement, and a lot of them have a reason to do that – such as paying down debt,” he said.
“But we suspect that a lot of them take the money out of retirement because it’s too complex to keep it in.
“The result is that people are left with a worse outcome – leaving the system entirely and then being unable to make the full use of their retirement savings,” Mr Hesketh said.
Compare the pair.
You go to see a doctor for 1 or 2 x 15 min visits, and s/he prescribes a drug by scribbling two sentences on a piece of paper. Maybe a blood test or CT scan in between. The prescribed drug will alter your brain chemistry and has a massive list of (potential) side effects (written on a tiny piece of folded paper).
You go to see a financial planner for super advice. A 20 page FNA follows, along with a 70 page SoA, and let’s not forget the Product Disclosure Statements. At least 2-3 meetings x 60 minutes as well.
In the first example, not only has the doctor had extensive training, but the medication has been reviewed and signed off by the TGA before release to the public.
In the second example, the adviser (should) have high levels of training/experience but he remains responsible for product failure.
Not good enough. Raising the bar on adviser education and training standards is necessary. But consideration for an independent TGA equivalent to review financial products and their suitability for use is also necessary. (For example, it has already been done (controversially) for mysuper).
Agree totally. If we’re treated like professionals we’ll act like professionals. At the moment advisers are more busy covering their backsides than providing efficient advice.
degree minimum, national exams, compulsory memberships, FDS, Opt-in, Best Interest Duty, clawbacks…..and yet we’ll still be producing 50 page SOAs for a basic life policy recommendation or a $10,000 managed fund investment.
It’s not right and no wonder the robo-advisers are moving in. We’ve been duped.
Absolutely spot on. Rising standards and professional membership must also lead to reduced requirements to lower the cost of advice. We cost to much, the consumers know this and they are never wrong.