Speaking at the Adviser Innovation Summit 2021, Samantha Hawkins said decreasing adviser numbers and low numbers of new advisers entering the industry, as well as increasing compliance and regulatory obligations are all affecting the profitability of businesses.
“The significant impact is the viability of businesses going forward,” Ms Hawkins said.
“How many of those businesses will continue to be a viable option for the owners?”
A study Praemium undertook last year alongside Business Health noted a 41 per cent decrease of profitability in businesses, which was a “significant decrease” on previous years.
The research also found that notional profit of most advice practices on average is around 28 per cent.
“We are aware of the ever-increasing and changing impact of compliance and regulatory burdens on efficiencies of business and the amount of time that advisers have to spend on that, rather than actually spending it with their clients,” Ms Hawkins said.
“But we’ve also noted in research recently is that the number of platforms advisers are using has actually increased. On average, advice practices are using 2.6 platforms and that’s increased over last four to five years from 2.1. So, sort of going the wrong direction from an efficiency point of view.”
Speaking to ifa last week, adviser and founder of Australian service On Your Own Two Feet, Helen Baker, said the “over-regulation” of the advice sector is impacting financial planners’ mental health and driving them out of the industry.
“Over-regulation is putting an enormous amount of pressure on advisers’ mental health issues, the single adviser operation is being forced to merge, and many are leaving the industry due to the financial pressures, study pressures and increased CPD demands,” Ms Baker said.
“The increased regulation means advisers have less time in front of clients, plus increased costs to the practice including the need for more back-office support.”
Meanwhile ASIC commissioner Sean Hughes defended a number of regulatory changes introduced last month, which received criticism for all taking effect at once.
“These laws are not ‘set and forget’, but reflect changing consumer and community expectations, as transmitted through the Parliament,” Mr Hughes said.
“Instead, with ongoing experience and engagement, the benefits will accrue over time.
“We hope this consumer-first mentality will become second nature for all participants in the financial markets.”
“We hope this consumer-first mentality will become second nature for all participants in the financial markets.” Sean Hughes
Sean as a practitioner in the industry with over 20 years experience, relevant degree qualified, squeaky clean record and industry contributor I echo your statement. However it needs to be turned back on ASIC.
When ASIC adopts a consumer first mentality we might actually progress. On any measure ASIC has failed in the consumer first mantra.
Practitioner numbers are in decline, reducing access to the consumer.
Cost of advice both upfront & ongoing have increased to the consumer.
Data shows that access to advice is largely limited now to the top quintile of households by wealth.
The wealth Gap grows as lower wealth clients lose access to qualified advice but high wealth clients continue to afford it.
ASIC has a regulation & punishment first mentality not a consumer first mentality. The regulatory burden is an inhibitor to access to advice and that’s not about to change.
Financial literacy is in decline because the very people who educate the public on financial literacy (advisers) have been under a relentless attack from the regulator for a decade.
I can applaud the recent ROA samples because they are a step in the right direction.
However when the regulator fails to clarify laws, fails to understand what clients actually value in the advice process and then regulates for compulsory parts of the advice process that clients don’t value. Then the regulator should cease preaching about what it wants from industry participants.
Get your own house in order first.
Step 1. Understand what the public needs and values. Ask them, don’t assume.
Step 2. Reconsider any regulation that detracts from what the public values.
Step 3. Craft regulation around enabling advice as opposed to hindering it.
Sean Hughes is wrong.
“We hope this consumer-first mentality will become second nature for all participants in the financial markets”
Lets take a look at what ASIC have done for consumers:
– Huge increase in costs to service clients, means consumers pay more for financial advice
– More red tape than clients would like, which also creates a poor customer experience and confusion
– Failure to regulate unlicensed financial advice which leads to poor investments eg. Fin-influencers
– Failure to to regulate failed investment schemes leading to poor consumer outcomes eg. Stirling Capital
ASIC sure are doing a “stirling” job of looking after consumers