In a forthcoming chat, ClearView head Simon Swanson shared his views on improvements to the advice sector in 2022 and beyond.
“An important step towards making financial advice more assessable and affordable is to simplify the advice process and remove unnecessary complexity,” Mr Swanson told ifa.
“We support the recommendations contained in the Financial Services Council’s (FSC) recent paper on financial advice, namely removing the safe harbour steps in the best interest duty, replacing lengthy statements of advice with a simpler letter of advice, and amending the code of ethics to enable a principles-based system. The FSC’s recommendations are an important starting point.”
Last month the FSC told ifa it would engage with industry groups within the advice sector after the white paper drew some criticism.
In the paper, the peak body proposed a new framework that could reduce the cost of advice by almost 40 per cent (near $2,000) through recommendations that include abolishing the safe harbour steps for complying with the best interests duty and removing “complex” SoAs in favour of a letter of advice.
KPMG’s analysis of the FSC’s recommendations found that the cost of providing financial advice would be reduced from $5,334 to $3,466, would save advisers up to 32 per cent of time when dealing with clients and allow them to provide advice to an additional 44 new clients each year.
While groups such as the Financial Planning Association of Australia (FPA) and The Advisers Association (TAA) backed the FSC’s recommendations, others including dealer group Synchron and the Association of Independently Owned Financial Professionals (AIOFP) were not as supportive, with AIOFP executive director Peter Johnston slamming the paper as “technically incorrect”, “offensive” and “politically motivated” in an open letter.
Mr Swanson added that the tax deductibility of advice fees would be another improvement in advice affordability as it would reduce the net cost for clients and potentially encourage more people to seek advice.
“ClearView is committed to reaching greater accessibility of advice for all Australians and in particular we welcome Treasury’s upcoming quality of financial advice review,” he said.
The full piece with Mr Swanson will be published next month.
Realistically how many clients actually read the SOA ?
‘Unnecessary complexity’ must be removed to simplify advice process ? Easy, let a computer do it. Polish up your resume and find something interesting to do with your time.
“But that will deliver inferior outcomes to clients” … since when did this country give a damn about that? No one is jumping up and about the NBN (except for the whipper snappers but they’re not in our target market).
Even Coles is serving custard at a bargain basement cost. Sure, it’s close to water but it’s cheap and the people don’t complain.
About time we reconsider the “value” we add? If the “value” is not perceived by the client then it doesn’t really exist, does it? It’s just the thing we tell ourselves.
You can bet that I am investing in tech. Don’t ask me what a command prompt is though!
It is abundantly clear that consumers are the big losers in unnecessary financial advice complexity. However there are also some big winners. Regulators, software companies, paraplanners, lawyers, and compliance officers all benefit financially from unnecessary complexity. Their opposition to any reform should be seen for what it is… putting their own interests ahead of consumers.
the whole raft of changes have been deliberately set in place by the idealogues to make advice unaffordable – and with high barriers to entry – the moneys stays where it is. We live in another lawyers picnic – that has been the end game.
Abolish the safe harbour? No way until we have a consistent standard of educations and advisers across ALL advisers. Do you really think that getting rid of SOAs will improve the outcome for clients? When I look back to the pre SOA era getting reliable fully disclosed consist advice was a minefield for the poor client. And lets be very honest the vast majority of an SOA is generated automatically so whilst its a big document and medium to complex advice takes the same time in terms of document presentation. The manual component of generating a Letter of Advice compared to a full quality SOA is line ball.
Even if the process is simplified to become ‘affordable’ how many advisers will reduce their cost to client – none !!
You saved me having to write that myself. You are spot on.
Nothing good (for the client) has ever come out of anything the FSC have introduced. Colour me HIGHLY skeptical.
Correct. A bunch of product flogger mostly. Remember the Royal Commission? Revisit the testimony given by the FSC CEO at the time. Cringeworthy is being generous but pretty much sums up why the advice profession should consider the FSC as the enemy.