Once-off advice will not bridge advice gap

Despite some industry experts believing that once-off advice would increase given the rising cost of advice, industry experts do not believe it will bridge the unmet advice gap.

Speaking to Money Management, Centrepoint Alliance advice group executive, Paul Cullen, said the reality was that there were less advisers around and once-off advice was still costly to advisers to provide.

“The number of people are looking for advice is only going to increase and there's a demographic sort of tidal wave washing over with many people hitting those retirement ages,” he said.

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“If you look at the natural providers of some of that advice, they're no longer there such as banks. While superannuation funds do intrafund advice it is not comprehensive.

“So, there’s more people around and less people to do it. I think there’s more of a fundamental reason for that advice gap.”

Cullen said while a scoped adviser could do a piece of advice in 90 minutes and see more clients, the adviser would still have a pricing issue. Not only this, advisers would still have to abide by regulation, legislation, and the systems and processes that went into providing advice.

“You're not paying ongoing service fees but if it's fairly substantial piece of advice it is still going to be quite costly,” he said.

“It's going to involve a lot of hours and all those sorts of inefficiencies and red tape that go with advice. It will continue contribute to the cost of providing advice.”

Lifespan Partnership chief executive, Eugene Ardino, said the most expensive part of providing advice was the first piece of advice regardless of whether it was once-off or ongoing advice.

“The thing about best interest duty and safe harbour and other requirements is while they can cater for scaled advice you still have to meet requirements which are quite comprehensive within that limited scope advice framework. It’s still a very big job” he said.

“The reason advisers will do a piece of advice for $3,500 when it should be $7,000 to $10,000 is because, in my view, if the client becomes an ongoing fee-paying client they’ll be a client for the next 20 to 30 years.

“So, the mindset is ‘I’m prepared to do the onboarding at a discount or at a loss so long as I can recoup some of that cost because I’m going to have that client for a long time’.”

Ardino said if a client wanted one piece of advice without a guarantee of being an ongoing client, advisers were likely to charge a higher fee as there was no commercial reason to do that at a discount.

“The way you could have more ad-hoc advice is for there to be relief around some of the compliance requirements,” he said.

“Whether the client becomes an ongoing client or not, the amount of work involved in presenting the best advice to the client is the same. All that is different is the adviser looking at a one-off project rather than something that leads to more work so I’m not sure if we’d see more in that space.

“There would need to be relief in limited or scope advice.”

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Don't worry, the ASIC/Treasury review will recommend broadening the scope of intrafund advice and waive the need for SOA's to be provided by product provider employees. Hume will comply. What could go wrong?

The problem with independent advisers providing intra fund advice is that we are still bound by the Best Interests Duty which ISA advisers clearly arent (they are but it is not enforced). I called an Industry Fund to ask how an ISA "adviser" who "recommended" a client who is in their mid 30's to move their super from MLC (horizon 7 investment - 10 year average return of 13%) to CBUS (growth average return 9.55%) and cancel their advised insurance policies which had been in force for 6 years with Level Premiums could possible be working in the best interests of the client. The response was, everything is clearly documented, the client was warned about the potential loss of insurance benefits and that past investment performance is not an indication of future performance. I asked how this was allowed to happen and how it was legal and they said it was the client's choice. I calculated that the client would be over $5 million worse off at the retirement age of 70.

If an independent adviser had done the same, we would be removed from the industry and fined by ASIC.


Given this, did you consider reporting the adviser as per your obligation under FASEA Standard 12?

Even if nothing happens, it would still be worthwhile placing it on record.

Max, you seem surprised even shocked - why? I for one would be surprised if the advice was not delivered as General/Intra Fund and no Adviser. If it was an Adviser employed by the Trustee, what else would you expect the recommendation to be?
The only thing which would surprise me - ASIC stopping this at Industry Super. You must remember - ASIC stated at a Parliamentary Hearing years ago that they have not investigated Industry Super because they have no reason to believe they do anything wrong.

Funny - nah not shocked to be honest.

I'm upset at the equity of it all.

In providing financial advice, why should who you are employed by be an influencing factor to the accountability of your fiduciary duty to act in the best interests of the client?

“The job of financial advisers is to help their clients by providing professional advice that leaves their clients in a better position, not to merely execute their clients’ wishes, especially when those wishes are going to leave their clients in a worse financial position.”

Peter Kell, ASIC Media Release 18-266

This extract was taken from the Assured Support website. Surely this client example as you describe requires the adviser being reported.

How do we make advice affordable, the big question ASIC and so forth need lots of resources to try to answer. They waste our time with surveys, oh what can we do?? They fiddle about the edges when really the centre needs re aligning. Why not make it tax deductable to a certain level, that will make it a lot more affordable, its a pretty good start!

Why do we spend so much time and effort agonising about this.
When was the last time you heard a medical specialist bemoaning the high cost of their service? Or a lawyer, or an engineer.
Good advice on anything costs. Education, ethics, "the rules of the profession" all cost money and time and as professionals we are entitled to be paid for it. If a client wont pay for the advice they can go elsewhere - they will get what they pay for.

Well said Clem. Dead right. All the hand wringing by non-financial planners about costs etc. Mostly clipping their ticket on the public coin or leeching off the industry.


a profession works first and foremost in the public interest. it is our duty as a profession to ensure ALL Australians have equal access to affordable quality advice. and it is not just limited to the wealthy.

it is increasingly the case that only the wealthy have access to personal financial advice, to the exclusion of all others.

what sort of society do we want to live in? the well-being of my neighbor is my business because I live in a community and my children live in that community. so do you and yours.

as for medicine, medicare covers most people to go to the doctors to meet their basic needs.

as for legal, the legal profession works pro bono and there are also non-profits who provide legal assistance.

neither of these professions has overbearing, over-the-top compliance regimes and they can provide pro bono assistance effectively and efficiently (even though efficiently, fairly, and honestly is an obligation on financial services providers not legal or medical professionals)

we have no such way to assist clients. each of us individually can do some pro bono work but the extent of that is limited especially when nearly 9,000 advisers have left and a further 10,000 are expected to leave. it also requires the same full compliance obligations as a fee-paying client. it is not realistic to expect financial planners to do increasing levels of pro bono work to meet community needs, while the cost burdens are ever-increasing.

we are agonizing because this is a failure of public policy. public policy should be correctly formulated to serve the best interests of the majority of Australians.

it is not being done because the financial advice profession is being held hostage by vested interest or people within government and regulators who have a personal grievance against us to the detriment of society as a whole.

btw, I am already fasea passed and approved degree holder.

Once off Financial advice is a bit like once off medical advice. You can detect the tumor but it takes some therapy to do the job right.

Well if the IT experience of BT Panorama is any guide, it will be fascinating to see how many of the undercapitalised robo advisers fare when the IT crashes.

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