Financial planners are being forced out of business by the rising cost of Government regulation – something which should prompt a thorough assessment of how to fund any compensation scheme of last resort, according to the Financial Planning Association (FPA).
In a strong pre-Budget submission filed with the Federal Treasury, the FPA pointed out that new policy initiatives such as the compensation scheme of last resort were being imposed on top of an already complex regulatory framework which had evolved over several decades.
It said that planners were the subject to multiple mandatory fees and charges and that increases to the cost of practicing as a financial planner were occurring at the same time as significant disruption and reform to traditional revenue arrangements for planners.
It said that increasing costs were flowing on to Australian consumers, putting financial advice out of the reach of many and cited the cost of delivering a state of advice (SOA) having recently been estimated at $6,500 – several times the typic fee-for-service of $2,400.
“While the FPA supports the introduction of many of these reforms, the Government must consider their impact on the long-term viability of the financial planning profession. In particular, rapid increases to the cost to practitioners of additional regulation are a serious risk for small and medium-sized financial planning businesses,” it said.
“Major financial institutions, including Australia’s big banks, are leaving the financial advice business or reducing their presence. Many practitioners are sole traders or work in small and medium-sized practices and their ability to absorb additional regulatory costs is extremely limited. Escalating regulatory costs will result in financial advice becoming more unaffordable and unavailable for many Australians.
“While implementing its reform agenda in financial services, the Government must have regard to the cost to practitioners and the impact this will have on Australians seeking financial advice. Unrestrained cost increases will force the closure of financial planning businesses, reduce employment in the sector and set back the development of the financial planning profession.”
“The Government must investigate the recent increases to regulatory costs and carefully consider its reform agenda to ensure that, while it achieves its goals of protecting consumers and restoring trust in the financial services sector, it does not also damage the financial planning profession and make it more difficult for Australians to access qualified and independent financial advice,” the FPA submission said.
Comments
perhaps this should have been emphasized when you were preparing your RC submission... the horse has bolted and guess what - NO ONE IS LISTENING!
Busy introducing a Ground Breaking CFP deal no one gives hoot about ...
The FPA's submission will fall on deaf ears. There are several individuals in high positions within Treasury that view the FPA as the "head of the snake" and seem determined to bring down financial planning.
Who are they? I read some of the submissions to the RC from Treasury and it crossed my mind that the author was mad, uninformed, potentially corrupt or just had an agenda to push - and certainly against the FP profession. I see solicitors in the courts for this and that all the time and no changes there.
So, who are these people in Treasury, are they friends with those in ASIC? How are they related - and I imagine they are.
ASIC and the govt do not care about the consequences of these actions.
The view promoted by the RC was that advice was a waste and unnecessary.
Furthermore the best source of advice was via a member's existing fund.
Hence no restrictions on intra fund advice.
Except the FUND is not giving the personal advice - the Union Super fund ADVISER is giving the personal advice. The FASEA Code of Ethics, now in operation, states very clearly that the Code applies to all ADVISERS, irrespective of their employment/income arrangements. So against several of the Standards, Intra-fund fees (when unauthorised by the client), is a breach of the FASEA Code - hence should be shut cleaned up.
IT's not like planner can access the help Josh Frydenburg did at the last election. Increased funding on his campaign by $500,000 to $1m and have the luck of getting "Four grants totalling $653,000 which made Kooyong the third-biggest recipient of funding from round three of the Sports grants program". Spot the ethical dilemma if you can with any of this. I don't know controls the purse strings and strategy at Liberal HQ but i am sure their were no conflicts of interest involved.
Yes, but do you know how many Ralph Lauren Polo (Polo) shirts are worn at Kooyong Tennis Club on a weekly basis ???
My God, no wonder Josh needed to cough up the cash old man...the dress code specifically states that all male members must wear a shirt with a collar and sleeves ( you just can't have a shirt with just a collar and no sleeves or a collarless shirt, but with sleeves )...it has to be right, otherwise you could be asked to leave and the embarrassment that would cause among the clan would simply be awful...I mean, it's just not cricket old man (no, it's tennis ).
Anyway, sporting grants for polo's and starch in little Joshies patch is totally acceptable when you consider how relevant it is really is when compared to homelessness, education and family violence.
I mean, you just cant imagine the family atmosphere at home if mummy or daddy had been sent home from the club with a droopy collar or even worse, a polo without a logo !! ( nologopolo).!!
what's really hilarious is that all industry associations let me see so far:
1. fpa - calling for less regulation
2. smsf association - calling for less regulation, simpler advice framework
3. even the three major accounting bodies have joined in asking, simpler congruent advice framework for financial planning and tax advice
what do the government and ASIC do? propose even more regulations, 1 year opt-in, declaration of independence, this isn't going to stop until all financial planners are gone.
clearly, the government is listening to others not industry or the profession.
@fpa funny,
Why don't you also add that when ASIC decided to introduce their levy on Licensees to prosecute all of us,a figure based upon numbers in the industry was pulled out of a hat. (around $1100 p.a. per adviser) .
Due to the 2019 exodus of advisers so far, ASIC now finds it necessary one year later to increase their levy in 2020 by 25.0%.
It gives a new meaning to CPI increases !
I don't believe it's to prosecute more advisers but more to build a future "war chest".
Call me cynical but if the numbers continue to fall in the financial services profession, do you think the ASIC levy will rise ?
It's a rhetorical question and all I can say is ....."Good luck to the last man or woman standing"
I agree with you. the vast majority of advisers still think it is possible to provide advice profitably. they are in denial, and I can understand why that is, many of us have spent our entire lifetimes earning multiple degrees/ qualifications and making immense personal sacrifices at the expense of our loved ones building something and it's not easy to just pack up and leave and to try and continue on with it for as long as we can. many of us also love what we do and why we are trying to stick it out and not to be seen as a quitter.
but facts are facts, and they are undeniable. there will be few practices that will be able to survive the onslaught of the regulatory burden, on top of the regulatory compliance there is another set of compliance from fasea. we were already struggling to try to cope with the obligations from our dealer groups and ASIC, and perhaps our professional body throw in the tpb and fasea and it is over the top.
most of us spend our days, trying to make sure we are complying with the obligations not providing advice to clients.
so it's time for me to bid you all farewell. I really did give it a good shot but it's time to go.
The FPA, AFA, SMSF Assoc, Accounting bodies all need to band together as one and lobby the government about this over regulation. The whole industry is subject to a Political PR exercise.
I don't know any advisers that are left that are members. The FPA just represent a bunch of advisers who have there membership paid for them via an excel spreadsheet and one cheque in return for doing what there told. One could say; The Voice of AMP speaks..... The article states "difficult for Australians to access qualified and independent financial advice,” the FPA submission said" Disgusting that they've used the term independent when they've purposely helped restrict it's usage and contributed to the demise of independent advice over the years. Dearest FPA, You can't put in a submission to Government when you're getting payments from multiple parties that have conflicting interests. Just go away you're doing more harm than good.
Bang on, left FPA nearly 10 years ago, simply did not listen, why? Because they are conflicted.....
Lets face it, the FPA/AFA and any other industry association, have done a poor job of conveying the message of the individual planner to govt & regulators. ASIC has only ever done a poor job of regulating, citing constantly they are under resourced, now the govt has opened the floodgates on funding to them and it's party-time. More regulation, more compliance, more confusion, more cost, more and more of the industries best advisors heading for the exits.
It is becoming apparent to me that Govt want to severely disable or even kill this industry. The ISN definitely want to kill off they're "perceived" competition, the individual financial planner. Financial planning is very much a "cottage industry" that failed to organise and unite as a single force, making us easy targets, thus we find ourselves in this sorry sorry mess.....end game, the consumer who desperately needs financial advice can't get it and certainly can't afford it. Congrats Govt, congrats ASIC, congrats ISN, looks like you are quickly nearing your goal. WHAT A BLOODY MESS.........!
This seems like a tale of fiction, but sadly it is REAL. All these opinions we share, are to the converted, other planners, these messages need to get to the politicians and to the consumer, before it is too late!
To add insult to injury, ASIC charges the extortionate fee $899 to cancel the useless Limited AFSL. No wonder the banks thought it was ok to charge fees for no service.
Actually because the FSC has been so weak (in supporting advisers), they will find that the advisers will become their competitor replacement product providers. No FDS & all direct one off invoicing (outside of platforms). The FSC are as dumb as an ox.
Nothing but an atom bomb on ASIC, FASEA, FPA, the media and Canberra will change what has become the status quo. I'm feeling like I am abandoning my clients, but there's no option left. Won't be enjoying my "enforced" retirement. Will have to volunteer my accumulated knowledge and good old common sense to local groups like Rotary, the Salvos etc. I'm sure they would be delighted to have someone to call on for free.
FASEA has an annual budgeted revenue of $3.9m (from their Annual Report), which is currently funded by CBA, NAB, ANZ, AMP, Macquarie, Suncorp & Bendigo Bank (Westpac relieved themselves of this responsibility when they sold their advice businesses in 2019). Despite being the biggest conglomerate of dealer groups, IOOF does not fund FASEA. The current funding arrangements expire June 2021. What do you think is going to happen then? If FASEA continues to exist, then it's likely they will be funded by the entire industry, similar to how the ASIC Supervisory levy works, which is based on a flat fee per AFSL, plus a $$$ figure per adviser on the FAR. On a conservative estimate based on 20,000 persons on the FAR, that's $195pp. And we'll also have the new Single Disciplinary Body as well starting in early 2021, with a registration fee likely for this one as well. Something's gotta give.
After watching ABC TV The Business last night with Bernie Rippoll & Sally Loane from the FSC, the stitch up is on, & it will all be in place on 1 Jan 2021. The FSC might live to regret this, however.
Bernie Ripoll needs to protect Bernie Ripoll.
Subsequently he agrees with everything that is being done irrespective of consumer cost, small business impact or access to advice.
Bernie wants to remain engaged and employed by the industry as a consultant and commentator and if he sticks his head over the wall and speaks up he will be shot immediately.
There are now so many experts, commentators , influencers and bullshit artists in this space it's like throwing up in your own lunchbox.
The industry is imploding with over regulation and stratospheric compliance costs.
The Govt is pushing forward with everything irrespective of negative effect on the consumer and business because Morrison, Frydenberg and Hume seem to be ultimately gutless and scared to be seen to question anything at all stemming from the Hayne Royal Commission.
They know if they do, they will be criticised and accused of watering down and backtracking.
This is about politics and public perception. It is not about reality and ensuring that there is in fact a Financial Services industry left by which to provide consumers with quality advice at a reasonable cost.
It is interesting that Sally Loane was not asked any questions in relation to the state of play within the Life Insurance business including significant decreases in business inflows, decreases in profitability of FSC insurer members , the rapid decline of experienced Risk Advisers and the impact this factor may eventually have on the public purse.
From an organisation that pushed and pushed for the significant reduction and proposed obliteration of insurance commissions for advisers the results of their actions in agreeing with the Trowbridge report are now coming to fruition.
The amount of overeach is unsustainable and is killing the industry rather than assisting it to be manageable, profitable and compliant and as such of value to the consumer.
why don't asic go after the mortgage brokers and give us a break for a while. mortgage brokers make a helluva lot more money than financial planners. sitting on millions of trail books, money for nothing as Matt Comyn CBA CEO said at the royal commission.
ASIC, you are in the business of destroying businesses and lives. go on, sic em. go after the brokers you dawg!
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