Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
Stability, simplification, abolition of Safe Harbour, FDS proposed
“We are at a critical crossroad, with an aging population, and the “Great Australian Wealth Transfer” at our doorstep” explained Lifespan Financial Planning CEO Eugene Ardino in an open letter to Scott Morrison and Anthony Albanese on the eve of the Federal Election.
Ardino was compelled to speak out on behalf of the financial advice industry in order to highlight a number of issues that continue to plague the financial services community and flag four key areas of improvement.
He highlighted the decimation of an industry that once neared 30,000 registered participants which is now down to 15,000 and the need to simplify regulation to improve the ability for every Australia to access quality financial advice in future years.
“Government has not recognised the advice community as the profession that it has now become, and therefore not provided the trust that our profession deserves”. Four key areas must be address if the industry has any hope of expanding their reach and continuing to attract new entrants.
The first is clearly certainty and stability around legislation, for which “we need a measured, long-term view” as “ongoing change and upheaval has left licensees and advisers battered and bruised”. Ardino is asking for a commitment to not increase compliance requirements and where appropriate reduce them.
The fundamental issues impacting on advice affordability remain on the cost side, with the “sheer amount of disclosure and record keeping documentation required” being overwhelming and an administration burden. The result is most firms wear the cost in order to engage with clients that are unwilling to pay the true price.
Practical suggestions include reducing file keeping requirements but specifically abolishing Safe Harbour, which effective forces the advice firm to prove their innocence. This is the reverse of most professions where “inappropriateness generally needs to be demonstrated for them to be sanctioned”. Advice documents including SOA should be simplified and FDSs also abolished. He suggests that “client fee consent everyone or preferably two years should be sufficient”.
The industry needs support from the government to rebuild consumer perception regarding the value of advice and “stop perpetuating mistrust” of the sector. Finally, and there has been positive trends in this area, the next government must “continue to provide certainty in the superannuation system” rather than treating it as an election sweetener.
