Advisers shine amid COVID-19 but is Frydenberg aware of the glow?

As we have written elsewhere in this edition of Money Management there has rarely existed a time when good, professional financial advice has been needed more than now.

And as the Government grapples to get the right policy settings in place, the Treasurer, Josh Frydenberg, might pause to consider the reality that the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry reflected only one side of the story – the misconduct.

The Royal Commissioner, Kenneth Hayne, was tasked with finding misconduct and that is what he found. Thus, there was never likely to be any extensive reference to the good works that financial advisers do, particularly at times such as now, amid the crisis of COVID-19 and, prior to that, during the global financial crisis (GFC).

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Financial advisers did much good work in helping clients navigate the GFC. Sadly, that good work was overshadowed by factors such as the collapse of Storm Financial with all its attendant negative publicity.

It has been a fact over recent weeks that financial advisers have rarely been busier as they seek to help clients deal with and understand the highly volatile markets which are being driven by COVID-19. It is most often not the sort of counsel that can be delivered via intra-fund advice or general advice.

And that is why Frydenberg and his advisers within Treasury should closely read the submissions responding to the legislation premised on the recommendations of the Royal Commission and ponder the impact the Government’s past and proposed actions will have both on the numbers of advisers and the cost of advice.

The reality is that when the Government’s Royal Commission response is put together with other initiatives such as the Financial Adviser Standards and Ethics Authority (FASEA) regime and increasing regulatory structures, upwards of 30% of advisers are likely to exit the industry with the consequence being significantly higher costs.

Indeed, there is already plenty of evidence that many of those advisers who intend remaining in the advice sector are culling their client lists to eliminate anyone they believe will prove unprofitable to service – particularly so-called mum and dad investors.

The Treasurer needs to consider these facts in the context of the Government’s intentions towards banning the payment of advice from MySuper accounts and, indeed, the processes around ongoing fee arrangements.

At the same time, the Government needs to ensure that the regulators, particularly the Australian Securities and Investments Commission (ASIC) are suitably facilitative in an environment where most sensible advisers have moved from face-to-face client meetings to screen-based and telephone consultations.

Economic stimulus and flattening the curve of the COVID-19 pandemic are likely to be the central focus of the Government and the Parliament for many weeks to come.

However, the circumstances also offer the Treasurer an opportunity to reflect on broader financial services policy decisions, including the value delivered by advisers.

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I have never in my career helped more people in the last 2 weeks. Our volume is through the roof and an 80 hour work week was put it in so I could help as many people as I could . People don't want to wait and cannot wait for you to produce ROAs and SoAs etc, they want advice and they need it right now. Sadly, helping is to the detriment of myself. Because of the govnerment, helping in such am environment exposes me to uncapped personal liability . It is simply not feasible to write file notes, produce compliance documents and do everything this compliance framework requires in such stressed environment and with such desperate demand. It is IMPOSSIBLE. With this kind of volume and with the stakes so high all you can do is put your head down and do whatever you can for your clients, file notes be damned. One day I fear for myself because my clients files will never be able to reflect the amazing work I've done in this period as one cannot file notes 4 or five one hour conversations a day and run your business. Rather a clipboard bearing bureaucrat will come into my life,accuse me of non compliance and ruin my life. I hope this event absolutely derails the govts reform agenda, because our broken nation is going to need affordable advice more than ever, and if the McCarthyism doesn't stop there's going to be no affordable sector servicing these people.

Well said.

ASIC if you are reading this, you need to start Auditing advisers random right now.

you will find lots of non-compliance because we are all busy helping people overcome the shock, and try to muster up the courage to keep going.

AUDIT NOW you ass holes, and ban every adviser

ASIC and APRA might be a little busy very some trying to figure out how to stop all those in Industry Super without an Adviser switching to Cash (essentially a redemption) and then the onslaught of $10,000 withdrawals and them another smash of $10K withdrawal - with plenty of members with smallish balances in the first place.
How do you sell unlisted assets now? Hedware or anyone?

Ever heard of private equity? Ever heard of people owning their own home? Ever heard of the Future Fund having unlisted investments of around 30%. Ever heard of unlisted property trusts? Ever realised that high wealth individuals tend to own a lot of unlisted assets? Ever heard of art being unlisted assets as well as art? How about precious stones, metals, collectables - heard of these?

Unlisted assets are sold by auction or trade - just like your house. Lots of things are sold off the stock markets.

Ever heard of Mr Market? The stock markets are not perfect trading hubs offering unbiased buys and sells. The stock markets create booms based on totally unrealistic evaluations - likewise with the crashes. Listed assets are no more virtuous than unlisted assets in the manner of evaluations.

Now if you are against unlisted assets for some anti-union thing then that is okay. But if you are a financial adviser, then unlisted assets should be in your trade to help clients.

I agree with you that now is the time for financial advisers to show their wares and to help their clients through these constrained times.

The financial advice industry must state and promote its merit and not expect others to do it. The Prime Minister, Treasurer and others have more important matters to worry about than the ego of the financial advice industry.

"LAME".....Would you please supply your current address ?
I believe there may be a few advisers that need to come around and pay you a visit.
It will only be brief , but highly effective.

The Hayne/ASIC/Frydenberg changes to ongoing fee arrangements will make it extremely hard for advisers to provide the sort of assistance being provided to stressed consumers right now.

In their zeal to indiscriminately persecute all advisers, Hayne/ASIC/Frydenberg seem to have lost sight of the enormous harm they will do to thousands of innocent advisers, and hundreds of thousands of consumers.

Well said.

In fact I suggest the harm has already been done to many advisers who are spending countless unpaid hours (I would say months) sifting through old historical paperwork to provide evidence of advice, to meet compliance and red tape requirements - of no value to clients or adviser capacity and effectiveness now. The historical paperwork may not reflect the business relationship and trust built with longtime clients and the many phone calls that occur throughout the year that may have not been file-noted many years prior.

The current cost also includes time not spent on existing clients and pressure on financial advisers and their practices which support there own families. Such a blunt tool for the majority innocent advisers who pay the price of the few bad apples and unscrupulous sales practices. They should have been pulled up by their licensees or the many ASIC/AFCA/others organisations through due process.

Also the multimillion dollar resources spent on remediation and lookback programs in the industry now could have been spent on positive efficiency, education and process initiatives going forward. In all of this the clients' interests have not been best served in this practice and advisers have been treated with contempt.

I have worked in many industries over my career and never have I seen such ridiculous
documentation and tick a box exercises that the client does not understand, nor want or values. 60 page SOAs without a simple summary and CAFs, FF, Risk Assessments, Opt In, OFAs FDSs, BIDs, BPS, ...etc can be so onerous they have lost sight of the client and their needs. Checks and balances are needed of course but this is insanity.

Too much of the blame and onus has been passed down to the advisers dealing with the clients face to face whilst the big organisations and management teams roll out more sticks and bureaucratic processes. If ever there was a time for efficiency, culture and change management it is now but there needs to be parties working together rather than the current litigious and blame culture environment that exists.

While I agree with your line that the process has become well and truely bureaucratic and has parts that offer little value in developing financial plans, the bank and financial services industries/companies did bring the bureaucracy upon itself through the years of greed and criminal behaviours. The financial advice industry through its professional bodies and some shady advisors were complicit in this whole mess. In other words this was the cause for the findings by Haynes and the over-oversight by ASIC - pigeons coming how to roost.

The banks might have got fined but their victims really got nothing and have suffered the loss of their farms and houses, their businesses, their nest egg.

The advice industry needs to step up, be constructive and come up with what it thinks is the minimum material required to give good and valuable advice at a reasonable cost to clients while having an ongoing business. This is something the two advice bodies should have done in the first place.

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