Synchron director Don Trapnell told ifa the majority of the approximately 100 practitioners that had left the dealer group in the past year had chosen to exit the industry permanently, and had been risk specialists.
“Fortunately Synchron was able to attract around 80 advisers, so we only lost a net 20,” Mr Trapnell said, noting that the group currently sat at 514 advisers and held a 2.4 per cent share of the Australian advice market.
But Mr Trapnell warned that the exodus from the advice industry more broadly was not slowing down, demonstrating the current regulatory settings were not fit for purpose.
“The ASIC FAR report of 7 January 2021 revealed that there are 3,038 fewer advisers taking financial services to Australian consumers now than there were 12 months ago, meaning the total number of advisers in Australia has contracted by 12.5 per cent,” he said.
“That is a real problem for our industry.”
Illustrating Mr Trapnell’s point, a former Synchron adviser shared his reasons for leaving the industry despite being on the road to becoming FASEA qualified, stating that regulatory change has made providing life insurance services to his clients “near impossible”.
In a recent letter to Synchron management, Richard Dixon, of Queensland practice Broadwater Financial, said he was requesting to cancel his advice authorisation “with a heavy heart”.
“The level of compliance, education, costs and diminished income, along with the time required to meet my ASIC duties as a risk only adviser, have made it very difficult for me to continue providing this service and protection to my clients,” Mr Dixon said.
Mr Dixon, a qualified accountant whose practice also provides broader business advisory services, said he had a “full understanding of the need for compliance”, but that the current regulatory settings around insurance advice did not make sense.
“The best interests duty with regards to risk is flawed. We go through a fact find, research, provide an SOA with advice on a product that in most instances the client can’t afford. If there is a replacement product required it is even more difficult,” he said.
“Eventually we get to a point where we can provide some cover to the client. The result is a mentally drained and confused client that has signed all sorts of documents, and is probably thinking that they can’t possibly go through that experience again so chooses not to change their cover in the future when circumstances change.”
Mr Dixon said he had not been deterred by the professionalisation of the advice industry and had had his qualifications assessed by FASEA with the intention of progressing through his education pathway, but the lack of action from government and regulators to address out of control compliance requirements had eventually pushed him to exit the sector.
“I did keep my AR in place in the hope that ASIC requirements would change and the revenue earning model would change. I didn’t want to throw the towel in,” he said.
“[But] having had time to assess the situation over the past year I don’t see any changes on the horizon, hence my resignation.”
Mr Trapnell said the resignation of Mr Dixon and others like him revealed that current advice regulations needed to be more flexible to cater to different client services.
“Until we move towards recognising the differences between a risk adviser and a full service financial planner, we will continue to see risk specialists leave the industry, reducing the pool of risk specialists available to serve the needs of the consumer,” he said.
“Attempting to force a risk adviser to be educated in the full service offering is akin to asking a plumber to learn how to be an electrician. Both trades need to know where they fit in the house, but neither needs to know how to build the whole house. Separating the disciplines will lower the regulatory requirements for a risk adviser and thus reduce the cost of advice for the consumer.”
The writing was on the wall 10 years ago, so we did something about it. We began the ( slow) process of reverse engineering our practice from risk specialist to holistic financial advice. This has been arduous and fraught with difficulties. I needed to succession plan more quickly, to find a suitable person to lead that change. I was lucky, that person was there and available. However the pace of change Eg LIF and other distractions Eg Hayne RC and the generally haphazard compliance pile on has made for slower progress than we had hoped for. We are still not out of the woods, Risk revenue still accounts for a significant amount of our T/O but new Risk business is down significantly, our servicing costs are astronomical and we are having to turn business away because the cost of providing stand alone Risk advice is off the chart. As the older business partner, I have resigned my AR and have found a new way to contribute. Like I said earlier, I am lucky, but I’m not where I should be and will be pushing my retirement plans out by 5 years.
The only reason I am not leaving this industry is because I have no choice. If I were employed I would have walked already, there are simply better risk adjusted ways to earn income other than this nonsense. Due to the size of my loans and falling multiples, I am stuck in negative equity and the moment that changes I AM DONE. I have as good a business as one could wish for, HNW clients, substantial average fees over 15k pa per household and a very good flow of leads with circa 10m in assets. And yet, despite this, I still find it to be an absolute oppression and not worth the risk and effort when I consider what I earn. I could move into a senior management role and quite easily double my income without the bottomless pit of risk! Many advisers will find they have better opportunities elsewhere.
“the current regulatory settings were not fit for purpose”. I would argue they are ideal for the purpose if that purpose is to dismantle and destroy advice as a viable profession: that IS its purpose.
And I wonder where the architect of this whole mess is now sunning herself after leaving politics with a big fat tax payer pension for life? no responsibility for the fallout and mess left behind what so ever. Just a big fat pay cheque for a job not at all well done. That is the broken system we live in. Hopeless politicians creating disaster with not a care in the world.
Agree 100%. I could use some near-inflammatory language here but it isn’t fitting. Suffice to say, is that those who make the laws know so little about them. We’re seeing the dismantling of an industry which as served Australia well for over 150 years. And to what gain for those seeking to protect their families and for those who derive a living from it!?
Well said Don. I do note that the various associations have treated the matter with determination as to our plight as advisers albeit the arrogance of the current government and the incompetance of the alternative party gives me no confidence. With mortgages now at significant levels, there has never been a time of greater need for risk advisers. It seems though that these foolish ministers simply do not care as long as ther mates in the banking and insurance world can gauge fees and or premiums at the expense of consumers and consumers have less guaridians as planners to turn to. Short term thinking has never helped but then again, what do you expect when we have the blind leading the visually impaired!!
ASIC knows what it is doing…………
Not everyone is leaving because they don’t want to participate in the ‘professionalisation’ of financial advice. Some are leaving because they have options and they will utilise those options when it becomes clear providing advice is no longer economic and too dangerous to do so (i.e. these are the Advisers with 15 years experience, under age 40, 2-3 degrees, ticked off the exam and ethics subject in the first tranche).
The adviser numbers will fall off a cliff in about 5 years, the only thing slowing down departures is the business owner Advisers that cannot easily pivot into something else.
The affordability issue is a red herring. The average SOA is about $3,300 and there is about 30 hours that goes into creating it. This is a charge rate of $110 per hour. Realistically this needs to be tripped to be economic. If the regulatory focus shifts to “highly scaled/scoped” advice that only takes about 10 hours to complete, the cost would still be $3,300 ($330 x 10 hours). Prices won’t reduce for consumers, ever.
All agee with 100% i too am exiting after 40yrs
Which would put you somewhere near retirement age!
I don’t think you’d have to go too far to find an adviser that no longer provides risk insurance. We’ve reached the point where it’s in a clients best interest to get crappy and expensive insurance via a call center. Regardless of the financial means of the client, providing risk insurance for an adviser is a compliance nightmare. Financial Planning as a whole has almost reach that point too.
Told my BDM’s just 3 weeks ago we were opting out of doing risk for our clients. We’ll keep the ones we hive, while the bloody-minded premium increases continue to escalate the attrition. Was sad to do but the refreshing honesty is that the BDM said that this is a common discussion.
It’s not just the increased compliance and reduced commissions. When insurers increase premiums by insane amounts (like BT’s recent 72% increase to some “level” premiums), it totally undermines client trust in the adviser who recommended that product to them. The broader ongoing relationship is destroyed. Declining to give insurance advice will become the preferred option for most advisers.
BT and AMP applying similar outlandish increases. Showing complete disdain for the client and adviser relationship. My understanding is the insurer incurs an immediate cost of approx $3-5k when a complaint is submitted to AFCA. As an adviser force for everyone of these ridiculous increases we should submit an AFCA complaint. Not sure if AFCA can do anything about it but insurer will incur a significant cost each time they do it.
Can only hope Richard has sat down with his local Federal Member/Senator and explained the current, and long term turmoil their “blind” decisions are resulting in!!
A real shame to lose these advisers and for many previously “serviceable” clients to be “left out in the cold”.
If the pollies actually realised the devastation they have caused, they too, might admit themselves to a medical facility to escape the scrutiny!!
Love the connection there – well done!