On 14 December 2017, the landmark Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was established. Over one year later, it concluded on 4 February 2019 when the final report was publicly handed down by Commissioner Kenneth Hayne.
Its principal objective was to “restore trust in Australia’s financial system”, following unearthed cases of misconduct, fraud and “fees for no service” scandals in the banking system.
“From today, the sector must change, and change forever,” stated former treasurer Josh Frydenberg in the final report.
During the intervening five years, the advice profession has dramatically fallen from its peak of approximately 28,000 advisers in 2018 to just over 15,660 currently – often referred to as the “adviser exodus”.
Money Management spoke with five industry commentators to hear their perspectives on the state of the financial advice profession now.
Colin Williams, founder of Wealth Data: “You could write a book on all the changes we’ve seen. The biggest change in my opinion was the exit of the banks where AMP and IOOF (now Insignia) are the only ones providing advice anymore. That was a huge drop and that’s what led to the huge demise in adviser numbers we saw as well as the introduction of the financial advice exam.”
Blake Briggs, chief executive of the FSC: “Over the last five years, there has been significant changes in the superannuation and wealth industry, with consumers benefiting from superannuation funds lowering their fees to become more competitive and the entrance of global wealth businesses into the market. Increased competition in the superannuation sector will continue to benefit consumers as funds seek to outperform across fees, investment returns and customer service standards.
“The royal commission also brought an opportunity for meaningful advice reform and paved the way for the Quality of Advice Review. There is optimism within the industry that the government will implement key recommendations from the advice review this year, which will have a material impact on the advice industry and its customers.”
Stephen Prendeville, founder of Forte Asset Solutions: “If I had to pick one change, then I would say the focus on client fees and service delivery. The Hayne report and subsequent legislation made fees more transparent, and the removal of grandfathered revenue made businesses focus on each client and their profitability; it’s no longer a few big clients subsidising smaller ones. It also made the advice process more transparent and is delivering better service levels. It was a transformational time, a baptism of fire, but we got through it.”
Sarah Abood, chief executive of the Financial Advice Association Australia (FAAA): “The changes since the royal commission have been seismic, particularly for our profession. The most profound one is we can now say that financial advice is truly a profession. Australia now has, by some margin, the highest requirements for the financial advice profession anywhere in the world.
“The top 10 licensees pre-Hayne controlled around 70 per cent of financial advisers, and now none of the banks retain a stake, and the number has reduced to 20 per cent. There has been a massive fragmentation of advice.
“Looking at demographics, the average age of an adviser used to be 59, and we have seen that flip with an average age of 48. That’s a good thing to see a younger cohort coming through and a real positive for the future of advice.”
Brian Pollock, director of corporate governance at The Principals Community: “Following the royal commission, there is now more recognition of the professionalism in the industry. There has also been a shift in consumers recognising the value of getting advice as well, and that has helped with how the adviser is treated – a lot of them felt shame at the time of the commission – and this has subsequently helped the outcome for the end client.”
Click here to read what five advisers thought of the commission and the industry progress.
