Will advisers be made to pay for reducing the cost of advice?
Are scaled advice and technology key parts of the formula for driving down the cost of advice in an environment where there continues to be consumer resistance to paying more than $500?
If one thing became clear from Tuesday’s Financial Services Council (FSC) Future of Advice Summit it was that the Federal Government wants advice to become more affordable and that it has been exhorting the Australian Securities and Investments Commission (ASIC) to deliver on that objective.
However, the means by which the Government wants to achieve that outcome is via a reduction in regulatory red tape, greater use of scaled advice and the use of technology.
The Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume pointed to the use of technology and the reduction in red tape as being avenues the Government believed should be followed, while ASIC commissioner, Danielle Press pointed to upcoming consultations around providing easier access to scaled advice.
But, as Paragem managing director, Nathan Jacobsen and Financial Planning Association (FPA) chief executive, Dante De Gori made clear during a later session of the FSC summit there is a huge gulf between the $500 consumers say they are willing to pay and the $3,000 holistic advice is likely to cost.
This was even more the case in circumstances where the vast majority of consumers across almost all generations said they wanted face to face interaction with their advisers.
De Gori went so far as to drive home the fact that shortcuts could not be taken with respect to the quality of advice and that even those delivering advice over the telephone needed to be appropriately qualified to do so.
“And there is a cost associated with that,” he said.
For his part, Paragem’s Nathan Jacobsen referenced the $500 figure cited as what consumers believed they would be willing to pay and said that appropriate advice would never be delivered at that price.
Sitting at the heart of the FSC summit was a research report undertaken by actuarial research, Rice Warner, usually better known for its work in the superannuation sector within which it suggested a restructuring of the advice based on the following points.
- All advice to be one of two categories – strategic advice and financial product advice;
- New definitions of financial advice – general information; and personal advice separated into simple personal advice, complex personal advice, and specialised advice;
- New principles to refocus the system – simplification, affordability, accessibility, consistency, and quality of advice;
- Less documentation – for example, allowing a Fact Find and a Record of Advice for the provision of Simple Personal Advice;
- Realistic and less costly levels of compliance; and
- Tax deductibility for financial advice.
FSC chief executive, Sally Loane said the Rice Warner research would be used as the basis of a Green Paper on financial advice to be released next year.
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