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).
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.