In a speech to delegates at the Netwealth UK Study Tour, associate lecturer of the University of Northampton, Gillian Cardy, said that while Australia was 20 years behind the UK, this showed that independent advice has a future despite the added regulations.
She noted that the number of financial advisers in the late ’80s dropped from over 100,000 to swiftly “something in the order of 30,0000 and now it’s 25,000”.
Because what happened when the UK first started having meaningful retail regulation, Ms Cardy said pretty much all of the big direct sales companies stopped selling, with a couple of exceptions, and even then they had small residual sales forces.
“And that huge drop off was, if you look at the numbers now, almost entirely from the big, old-fashioned, direct sales product providers that used to have really big distribution networks in the UK. That’s the drop off,” Ms Cardy said.
“And that’s why I think you can be extremely confident whenever we talk about self-licensed advisers have a future … yes you do because we’ve spent [over] 20 years proving it. You do not need to be a part of these big sales forces, the banks and the insurance companies.
“And from their point of view, the costs of doing it, the higher levels of compliance, monitoring, training, support and so on, may not be cost-effective for them to maintain these huge networks of advisers.”
To add further context, Ms Cardy said the ’80s was when the UK first introduced school-leaver, minimum levels of qualification, whereby anyone could have one job one week and, in a fortnight’s time, they could be out financial advising.
“The system had no credibility whatsoever and they’re selling stuff at the same time, so I think there was a bit of a perfect storm,” she said.
“The companies stopped providing it, people left, they didn’t want to get qualifications and so on. So those people were, if you like, lost to financial services.”
a 75% drop in advice providers – put forward as a good thing.
In an age when financial literacy is a major problem and the public get duped by online scams at alarming regularity.
How is it considered successful to have less advice providers that can guide the public through their life events.
That statistic is an indictment on regulation. It merely proves that the added cost of red tape severely limits the publics accessibility to authorised advice.
Imagine that every time a doctor saw a patient they had to write a 65 page report demonstrating how they know the patient, outlining all steps taken to come to diagnosis, outlining steps considered but not taken with reasons why, explained all of their training and ongoing competencies and then had to make sure the report was so watertight that it would withstand future scrutiny when the rules get a different interpretation? What would happen? Inertia – nothing would get done. The costs of seeing a Doctor would skyrocket so many would simply go without. Hope their chemist guesses right or turn to alternative medicines.
[quote=Anonymous]This is not a good comparison and doesn’t articulate the significant differences in the markets. The UK still has ‘tied agents/product advisers’ whereas the prospect for Australia is a void or reliance on tv advertising… Additionally qualifications required are still very low comparatively and vary significantly across the landscape of financial services. Many instances we would consider as requiring pieces of advice don’t in the UK and so don’t attract the same level of quals and regulations by the FCA. Additionally, many sales agents left the industry at FOFA when insurance became advised…
[/quote][quote=Anonymous]This is not a good comparison and doesn’t articulate the significant differences in the markets. The UK still has ‘tied agents/product advisers’ whereas the prospect for Australia is a void or reliance on tv advertising… Additionally qualifications required are still very low comparatively and vary significantly across the landscape of financial services. Many instances we would consider as requiring pieces of advice don’t in the UK and so don’t attract the same level of quals and regulations by the FCA. Additionally, many sales agents left the industry at FOFA when insurance became advised…
[/quote ]I have been a risk specialist for 30 years pal, and every policy I have ever sold was advised and based on a strategy to meet a need. That comment is totally unbecoming and an insult !
This is not a good comparison and doesn’t articulate the significant differences in the markets. The UK still has ‘tied agents/product advisers’ whereas the prospect for Australia is a void or reliance on tv advertising… Additionally qualifications required are still very low comparatively and vary significantly across the landscape of financial services. Many instances we would consider as requiring pieces of advice don’t in the UK and so don’t attract the same level of quals and regulations by the FCA. Additionally, many sales agents left the industry at FOFA when insurance became advised…
What an extremely uninformed academic. With a little research, Gillian Cardy should have been able to see that Australia mirrored what happened to the UK in the late 80’s and early 90’s. We had the same companies – Prudential, Norwich etc.. what happened there, happened here.
I think you can argue the UK is about 5 years in front of Australia in the IFA space however what we should learn from their experience is that what the regulator thinks the consumer wants and what the consumer wants are two very different things.
The fiercely independent businesses are struggling and aligned businesses simply disclose they are aligned and the consumer is happy with the transparency.
Insurance sales have almost disappeared in the IFA space – exacerbating their under insurance problem – and even the staunchest IFA is recognising commission is the correct mechanism for payment in this area.
The British ‘pension’ system is totally different to our open architecture and not particularly well funded with evidence the English are heavily reliant on their welfare system in retirement
Our regulator should be learning from other countries mistakes, not repeating them!
If it means that the Industry Funds are the only ones who can provide inhouse advise (their salaries subsidised by other fund members not receiving advice
– and without them having to provide FDS & Opt ins), then that is not a level playing field & needs to addressed. The independent advisers have been conned by the Industry Funds.
yet another academic.. this is the problem you know… too many theories and not enough practical experience.. everything is easy in the life of an academic
You are not adding Insurance in the UK is considered general can be sold with no SOA the same as a mortgage broker / Income protection only has a maximum benefit of 5 years and In Australia that is not the case
if they should change the laws to make it easier to help with the under insurance problem and seeing advisers sell the best quality products we should have the same if not less rules as mortgage brokers have.
The UK doesn’t have ASIC, AFCA, Treasury, TPB, FASEA, Code Monitoring body, ATO and AUSTRAC that all have great disdain for the existence of Advisers. Additionally, the UK doesn’t have AFSLs and Professional Bodies that will not stand up against the overzealous regulators intent on making life impossible for Advisers (and consumer access to advice as expensive as possible). Lastly, the UK does not have industry super funds that get away with breaking the law while never being investigated by any of the above regulators.
so Mr Academic can you and your theory mates answer one important question
Are consumers better off with the changes?
George, you really seem to have a thing about academics, believe me they are not all bad. They just sometimes dont see the bigger picture