Extra costs likely if wholesale test amendments go ahead: SAFAA

Reclassifying clients who previously qualified as wholesale clients will be detrimental in a time of declining adviser numbers, according to the Stockbrokers and Financial Advisers Association (SAFAA).

In a discussion paper ‘Does the wholesale investor test need to change’, the association said there were many firms who had adopted a business model of solely servicing wholesale clients and would be negatively impacted if these clients were instead classed as retail investors.

“With business models relying on the definitions in structuring their businesses to meet client demand, change will bring disruption and attendant costs associated with implementing change”, the report stated.

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“Licensees have aligned their business models to the current regulatory framework, including the wholesale client definitions. Advisers who have adopted a wholesale client-only business model are not required to have satisfied the educational and exam requirements that allow them to provide advice to retail clients.

“They would therefore find themselves treated as new entrants, subject to not only to the education and exam requirements but also the Professional Year requirements and without a livelihood.”

Similarly, they would be unable to provide advice to their former clients who were now ‘retail’ clients which would deprive those investors of access to an adviser they may have built a long relationship with.

“One outcome of the combination of a change in the wholesale client definition and the significant decline in the number of retail client advisers would be that reclassified clients would lose access to personal advice. At a time when the government, regulators and the financial advice industry concur that access to financial advice is now more difficult and there is a need to work together to improve access, cutting a cohort of clients adrift would be counter-productive.”

Finally, the pool of potential clients for those who remained offering advice to wholesale clients would also decline which “may exacerbate the decline in availability and affordability of financial advice”, particularly given the high numbers of advisers exiting the industry.




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Sophistication, or lack of, has zero relevance to an arbitrary outdated Asset hurdle. The focus MUST be on investors needs and the removal of their consumer rights as opposed to protecting flimsy business models.

Cry me a river.

Forgive me for not being sympathetic towards people who willingly removed protections for obviously retail clients in order to skirt the rules and line their own pockets.

Wholesale client definition should have very little to do with FUM or income and much more to do with financial literacy.

And how do you feel about Intra Fund Advice?

That it a completely separate issue and has no relevance to this article or my comment.

I don't want to be unfair to advisers who focus and work diligently in this area with clients who are truly well informed and engaged. But sadly it's become a magnet also for the advisers who will use any loophole to get out of the responsibilities most of us choose or have to work with. I've had a number of conversations at functions and congresses just when the education and FASEA standards were pending, and being told of a great way out by declaring clients wholesale (and firing the rest that won't qualify).Again it's probably the misuse of wholesale now bringing the whole concept into question. For the record we treat all our clients as retail under our own AFSL. Not a statement on morality, just FYI.

Just remove the family home from the net assets test. I don’t think dear old Lynn is a sophisticated investor because she bought a house 51 years ago on the water for $42k.

A clients financial literacy should be tested to be considered wholesale, just owning a home or investment property that's increased in value does mean a person knows the first thing about investing, risk or finance.

I'm sure the SAFAA's crocodile tears has nothing to do with pending $3.5 trillion intergenerational wealth transfer projected between now and 2050… “..Research by Griffith University researchers (Brimble et al. 2017, pp. 5, 36) and McCrindle (2016, quoted in Brimble et al. 2017) estimated that Australians aged 60 and over would transfer $3.5 trillion or an average of about $175 billion per year in wealth in the next two decades.”… ref. pp.62 Australian Government Productivity Commission – Nov 2021 – Wealth Transfers and their economic effects.
I’ve been dealing with HNW & UHNW for decades, and for many that have acquired their wealth via inheritance, most are very unsophisticated and needing advice. Ironically, Perpetual’s 2019 edition of ‘what do you care about’ noted “… it is estimated that 70 per cent of families will lose their wealth by the second generation and 90 per cent will lose it by the third. “ … which if we are to believe this report (which I do!) suggests that asset / income based testing for retail vs wholesale does nothing but facilitate the continued destruction of the financial planning industry by those with self interest rather than client’s best interest by arbitrarily enabling classification of ‘wholesale’.
I note it was the SAFAA that was among the few exponents cheering the recent legislative change for a ‘experienced adviser pathway’ which is yet another abortion, and kick in the teeth to all those that have made the painfully sacrifices to reimage and rebuild the financial services industry.
Fact of the matter is that it very simple to discern between retail and wholesale client. Which is… that any financially literate client will have a detailed understand the difference between wholesale and retail classification and protections afforded or not afforded under each classification, and will by virtue of this predominately choose the protection afforded under a retail classification, whilst also having given due consideration during the consultation process with their trusted adviser who is fully licensed and compliant; has their clients best interest first and foremost, and who can also advise under either classification.

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