The end of the financial year saw almost 550 advisers leave the industry in one week with industry experts believing there are still more large exits to come. Therefore, the Government would be wise to refrain from adding any more obligations to the industry that are not part of the Royal Commission.
The large exit right before the end of the year is mainly due to accountants relinquishing their limited licences as they deem paying the Australian Securities and Investments Commission’s (ASIC’s) ever-increasing levy to outweigh the benefits of providing personal financial advice.
With many potential self-managed superannuation fund (SMSF) members using accountants to help establish an account, this large hole created by accountants leaving the financial advice industry could lead to a decrease in the number of new SMSFs being set up.
ASIC’s levy has been the bane of the piling costs to advisers and the fact that the 2019/20 increase was due to declining adviser numbers does not do the Government any favours. Advisers will be watching to see what the levy will look like this year and will blame the Government for an increase in the levy if the reason is again advisers leaving the industry.
Not only this, there are a cohort of financial advisers who believe once-off advice is unsustainable for their business due to the increasing compliance costs and this could lead to an even wider unmet advice gap.
ASIC recently presented an infographic of their findings about the advice landscape and the top impediment to providing limited advice was that it was ‘too costly to provide’.
The infographic was a culmination of submissions put forward to the regulator on its consultation on ‘Promoting access to affordable advice’ and the Government should be taking these submissions seriously given the vast number of advisers leaving the industry and the fact that too few Australians are being financially advised.
Further complicating the situation is the mound of compliance obligations coming up into place in the next few months.
While many university graduates are coming out of university with degrees that satisfy the Financial Adviser Standards and Ethics Authority (FASEA) requirements, industry heads have told Money Management that these graduates have not flowed into new starters within the financial advice profession.
This is why the Government needs to make sure what they are doing to lift standards does not go beyond the scope of the Royal Commission, or becoming a financial adviser will be placed in the ‘too hard basket’ for graduates and undecided current advisers.