The average cost of providing a statement of advice (SoA) for new clients rose 10% between 2018 and 2019 in what was a reflection of the increasing challenge of compliance costs.
That is one of the bottom lines of an industry assessment undertaken by Financial Planning Association (FPA) chief executive, Dante De Gori in a column to be published in an upcoming edition of Money Management.
According to De Gori, the FPA’s members have been telling the organisation that the cost of providing advice has never been as high as it is today.
“Costs could increase further as financial planners adjust to increased surveillance and enforcement activities the Australian Securities and Investments Commission (ASIC) is undertaking following the Financial Services Royal Commission,” he wrote.
“Our most recent member survey shows the major challenge for planners over the next three years will be the cost of regulation, with almost half (48.3%) of FPA members agreeing on this, up from 33.5% in 2018. In 2019, 41.4% of our members said reducing the cost of providing advice would be a major challenge, up significantly from 25.3% in 2018.”
“On average, FPA members charge $2,671 to prepare a SOA for new clients, up almost 10% from $2,435 in 2018,” De Gori wrote.
“We believe the current framework needs to be re-examined to ensure financial planners can continue to meet compliance requirements while also meeting the growing demand for financial advice from consumers. It would be a sad day if Australians were regulated out of their chance to receive quality advice.”
Elsewhere in his column, De Gori acknowledges the role of intra-fund advice in helping keeping down the cost of advice.
“New innovations and technologies are rapidly being adopted at a practice level by financial planners across Australia to streamline efficiencies within their businesses and reduce compliance costs,” he wrote. “Meanwhile, many superannuation funds now offer advice to their members and are integrating digital-advice offerings along with intra-fund to help Australians who may not be able to afford full-scale financial planning.”
“It is important to recognise the depth and breadth of the advice profession, one where industry participants offer different levels of service depending on the needs of their clients. A full-scale financial plan may not be affordable for some, but there are other options available and lower cost is not synonymous with poorer quality – this has been widely misunderstood by many commentators, to the detriment of the unadvised majority of Australians.”