Pressure to pass on savings will push out small practices: McDonald

The regulatory and government push for more savings in financial advice and superannuation to be passed on to consumers is going to result in small financial planning practices being left behind due to an inability to generate savings, according to Snowball Group managing director Tony McDonald.

There is a two-pronged push by the Government to reduce superannuation fees to an average of 1 per cent and to foster transparency around fees so consumers can assess the costs of financial advice and superannuation. This push will put “demand pressure” on advisers to reduce their savings by creating more efficient work processes, McDonald said.

McDonald said if small financial planning practices were in a structure in which it was difficult to generate cost savings to pass on to investors, they would find it difficult to compete in the industry in the future.

“[Financial planning practices] probably can’t afford to ignore that call,” he said.

The former Minister for Superannuation, Nick Sherry, previously said the superannuation industry needed to take a long, hard look at their operations, cost and structure, while the Australian Prudential Regulation Authority has released a discussion paper suggesting the collection of data would defuse the long-running argument over fee structures and the value of financial advice.