Some small financial planning licensees could exit the market because of the increasing regulatory cost burden being generated by factors such as the industry funding of the Australian Securities and Investments Commission (ASIC) and proposed new external dispute resolution (EDR) arrangements.
The Association of Financial Advisers has told the Government that the costs of providing advice in future will increase because of the new EDR system currently being finalised within the Treasury.
In a submission filed with the Treasury, the AFA said the imposition of the new EDR regime had come at a time of other increased costs for the profession.
“In aggregate, these expected cost increases have the potential to reduce some consumers’ access to quality financial advice and could lead to some smaller licensees exiting the market due to increased professional indemnity costs,” the submission said.
“The AFA believes that great advice for more Australians leads to significant community benefits however the increasing costs of running an advice licensee and advice practices could lead to consumers having less choice when selecting an advice professional, and also making financial advice less affordable,” it said.
The AFA submission said that it was essential that the overall regulatory reform regime did not lead to a reduction in the availability or affordability of financial advice.
The AFA said that while it could see the merits of a one-stop shop with respect to EDR, it also recognised the potential risks of such an outcome.
“In particular, the AFA appreciates that there is some level of competition in the market place at the moment that enables financial service providers to choose their EDR scheme. Such competitive tension ensures that there is an incentive to remain efficient and cost effective,” it said.