Don’t shut first-time investors out of advice: SAFAA

As first-time investors become more sophisticated, their access to advice should not be hampered by public policy, according to the Stockbrokers and Financial Advisers Association (SAFAA). 

There had been a rise in first-time investors since the pandemic, many of whom were sourcing financial information from social media. 

Speaking to the Parliamentary Standing Committee on Economics, SAFAA chief executive Judith Fox, said this was a great entry route for retail investors but that many would need advice in the future. 

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“As retail come to the markets through online platforms and exchange traded funds, this can be a great way to dip your toe in the market,” Fox said. 

“What we’re concerned about is as you get comfortable, they really do need access to good advice as things get more sophisticated or they generate more wealth. 

“We don’t want their access to that advice to be hindered by public policy which is making it very, very difficult for new entrants to come into the stockbroking and investment advice industry because they’re being asked to train as financial planners.” 

Referencing the rise of social media ‘finfluencers’, she said the Australian Securities and Investments Commission (ASIC) was looking at it closely to establish if they were offering advice. 

“That’s an area of concern because social media influencers are not educated, they are not qualified and they are not licensed and they might not be understanding if they are straying into financial advice as opposed to offering an opinion,” Fox said. 

“They could be running a business model where they are making money of thousands or millions of people and that is a major influence in terms of its relationship to financial advice as an area of concern.” 

Meanwhile, asked by committee member Andrew Leigh if she expected to see this rise in retail investment fuel a platform like Robinhood, she said this was not the case as Australia lacked a pay-per-trade model. 

Trading platform Robinhood offered commission-free trades of stocks, exchange traded funds and cryptocurrency and was used by around 13 million users. This compared to pay US$5 to US$10 ($6 to $13) per trade on other platforms.  

“We don’t have pay-per-trade, it is not a system where the order flow is remunerated which is how Robinhood operates. The saying is that if something is free, then you are the product,” Fox said. 

“We have seen entrants which offer low broking fees which is good but they won’t displace the retail stockbroking model which is a full-service model which offers bespoke personal advice.” 

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Go tell that to Treasury and the keystone cop regulator in ASIC.

Young people will be thrown to the wolves and unregulated spaces until they change their tune.

There is NO WAY we'd take these people on in the present regulatory climate. There is so much business out there that can afford the fees to pay for our red tape nightmare.

Won't replace the stockbroking model? I beg to differ.

The stockbroking model is incredibly outdated and frequented by scammers who try and portray to their clients that they have a crystal ball.

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