Financial planners and their clients are being made to an unreasonably high price for the changes being wrought on the financial planning industry, according to the Financial Planning Association (FPA).
FPA chief executive, Dante De Gori said that while his organisation welcomed reforms which improved the overall standard of financial advice it should not be allowed to unduly add to the cost of generating advice.
In doing so, De Gori said that FPA research had indicated that the average cost for a statement of advice is around $2,700 – an increase of 10% on the previous year and reflective of the increased cost of operating as a financial planner in the current regulatory environment.
“When asked, 41% of Australians said they wanted to get financial advice,” he said. “Yet many of them won’t proceed because of the cost or the complexity of getting that advice.”
“Without the Government’s focus on this critical issue and the Parliament’s support, we will resign ourselves to a future in which only the wealthy can afford to access financial advice,” De Gori said.
He said the regulation of financial advice had become increasingly complex and costly and that in some instances, financial planning practices – many of which are small businesses – were struggling to remain commercially viable. Others have been forced to offer their services exclusively to wealthier clients to remain in business.
“The cost of operating a financial planning practice is significant,” De Gori said. “The cost of professional indemnity insurance has skyrocketed in recent years and regulatory and compliance costs continue to rise.”
He said multiple inquiries had bound the profession in red tape and added layers of oversight from multiple government agencies, including the Financial Adviser Standards and Ethics Authority (‘FASEA’), Australian Securities and Investment Commission (‘ASIC’) and the Tax Practitioners Board (‘TPB’).
“In our experience, these agencies add duplication and cost to the system while rarely communicating with one another and have at times offered conflicting viewpoints and differing interpretations of important professional standards such as the best interest duty (BID) requirement.
“Every agency tasked with overseeing the financial planning profession must be funded. Ultimately, they are financed by financial planning practices and their clients. Each new layer of regulation increases the cost of advice and adds further complexity.”
De Gori said Morrison Government would soon establish a new disciplinary system and single disciplinary body for financial planners as recommended by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
“A single disciplinary body will replace the role of code monitoring bodies, which several professional associations, led by the FPA, had planned to establish under professional standards reforms,” he sad but warned that there is a real risk that the new body might become just another agency that financial planners must fund to continue providing advice to Australians.
“This is a major opportunity for the government to consolidate the fragmented regulatory regime and create a sustainable system that will support our growing profession,” he said.
“The single disciplinary body should have primary responsibility for government oversight of the conduct of financial planners, setting mandatory professional standards, investigating potential breaches of mandatory standards and law, and applying discipline.
“A number of these functions currently exist in other government agencies, including FASEA, ASIC and the TPB. Rather than duplicate them, the single government body should assume these functions.”
