Suggestions on the Australian Securities and Investments Commission’s (ASIC’s) MoneySmart website that simple advice can be as cheap as $200 to $700 significantly underestimates the real cost of financial advice, according to the Association of Financial Advisers (AFA).
The AFA has used its submission to the Productivity Commission’s (PC) inquiry into Competition in the Australian Financial System to argue that such statements have led to consumers being unwilling to pay the true cost of providing financial advice.
“We note the reference in the [PC’s] Draft Report to the comment on the MoneySmart website that simple advice could be as cheap as $200-$700,” the submission said. “When the full obligations of preparing financial advice are taken into consideration, this is inevitably significantly underestimating the real cost of financial advice.”
In doing so, it pointed out that ASIC had recently released their example Risk Insurance Statement of Advice (SoA), which it said was a document that included over 20 pages of carefully tailored material.
“Personal advice provided to a new retail client with respect to a superannuation, investment or insurance product, must in almost all circumstances be provided by the means of an SoA,” it said. “Before providing the advice, the financial adviser must undertake a fact-finding exercise to adequately understand the client’s needs, objectives and personal circumstances. They also need to undertake a number of other steps including researching product options that are appropriate for the client.”
“There is a significant amount of work involved in the provision of financial advice. As the Productivity Commission has pointed out, there is a lack of awareness by consumers of the cost of providing financial advice and along with other assumptions leads to a lack of willingness to pay for the true cost of financial advice,” the submission said.
The AFA argued that there was much work that needed to be done to better ensure that consumers were aware of the cost of financial advice and were also willing to pay for the true cost of high quality financial advice that was in their best interests.
