How to reduce advice costs by 37%: FSC whitepaper

The cost of servicing financial advice could be reduced by 37% to $3,466 and allow advisers to see an extra 44 clients each year, according to the Financial Services Council’s (FSC) white paper.

The FSC released its ‘White Paper on Financial Advice’ today which it said was a blueprint for a simplified regulatory framework that could reduce the cost of providing financial advice and allow advisers to spend more time with new and existing clients.

The whitepaper recommended:

  • Raising the threshold under which consumers are identified as ‘retail clients’ to those with assets of less than $5 million (up from $2.5 million) and index the threshold to CPI (currently not indexed);
  • Abolish the safe harbour steps for complying with the best interests duty;
  • Abolish complex statements of advice for a simpler, consumer-focused ‘letter of advice’;
  • Break the nexus between financial product and advice and remove complex labels for different categories of advice; and
  • Move to sustainable self-regulation by 2030 in which prior learning and pathways, and individual registration are supported by the Australian financial services licensing regime.
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The reclassification of retail clients would increase protection for up to 275,300 consumers, it said.

FSC chief executive, Sally Loane, said: “Current regulations prescribe compliance obligations at every step of the advice process. They are an unprecedented driver of cost for financial advisers and consumers, and are past their use-by date.

“Long-term the FSC’s reforms could generate cost savings for the advice industry of $91 billion over 20 years.”

KPMG undertook an analysis of the three key recommendations of safe harbour, letters of advice, and simplifying categories of advice.

Its analysis said the recommendations:

  • Would reduce the cost of providing financial advice per client from $5,334 to $3,466;
  • Would save financial advisers up to 32% of time when providing advice to clients;
  • Allow advisers to provide advice to up to an additional 44 new clients each year;
  • Enable advisers to produce 2.2 letters of advice as opposed to 1.5 statements of advice per adviser per week; and
  • Reduce the time required to complete the advice process from 23.9 hours to under 16.8 hours per client.



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Surprisingly sensible suggestions from FSC. Except for the bit about "moving to sustainable self regulation by 2030". That target is far too mild and too slow.

Urgent intervention to fix the current mess of bad regulation is needed right now. Unless that happens, most consumers will be unable to access professional advice, and will fall victim to the rapidly growing alternative of dodgy unlicensed advice and dubious products, well before 2030.

Yep...we've had those conversations with low value clients..
Pay more, or there's the door.

The government were warned they were going too far with regulation and decided not to listen. At least the FSC is trying to push the pendulum back the other way. I think it would be great if we could get to a point as an industry where we do away with licensees and move to simple individual registration with a requirement to engage an auditing firm approved by ASIC. I'm sure adviser costs would be lower when you're not footing the bill for highly paid Licensee staff.

This option already exists to a large extent, through self licensing. Most self licensed firms choose to engage an independent compliance auditor. Overheads are certainly cheaper than licensee fees. But there are even bigger cost savings to be had by operating efficiently, rather than according to the licensee's bloated and prescriptive approach. And there's no pressure or "expectation" to recommend the licensee's inhouse product.

that's a partial solution but a patchwork solution.

we need a total overhaul of this disastrous AFSL system, I have a couple of masters degrees and passed fasea, and am more qualified than virtually all other professionals. my entire client base consists of barristers, specialist surgeons, doctors, dentists, orthodontists, lawyers, civil engineers. they seek my counsel and I am paid handsomely equal to if not higher than what they charge. none of them sees an issue, in fact, I joke with my barrister and lawyer clients about how much I charge them (except unlike them doing 1 hour of research and charging 10 I am actually honest about time spent). they love it. they see a lot of value in dealing with me and having a relationship with me, to know they work with a specialist who is highly qualified (in most instances higher than them ) and of course more honest than they are.

how is it that all of the above can operate with individual registration and I can't? totally stupid.

Agreed that self licensing is not the optimal solution. But too many advisers believe that being licensed by a dealer group is the only viable option. It's not. In the absence of individual registration like doctors and lawyers have, self licensing is the next best thing, it's available now, and it's far superior to dealer group licensing.

it's a fine balance. for most successful advisers, being authorized by an AFSL, that is not their own is a necessary evil. take me for example, I am highly qualified, have a thriving practice (multiple locations), but also have a very young family (2 kids under 8) (plus my partner is enrolled in post grad study) and so I am burning the candles at both ends and so for the moment, I can't take on the burden of more admin.

and trust me, there are many advisers like me of both genders under the same pressures.

How to reduce advisers risk income by half, double customers premiums, decimate new business and increase underinsurance? Simple force through the dodgy and disastrous LIF. Thanks FSC but your too late, we are all leaving.

Under the FSC proposal, they estimate the time required to deliver advice would reduce by 7 hours. That's good. But it will still take 16.8 hours to deliver advice!!! That's absolutely absurd and highlights the system is broken. What is the point of turning financial advice into a profession if we are not allowed to operate like one?

The point in turning it into a profession was/is to prevent you moving lots of Industry Super product to retain - product my George is where the money, control and power is.

Just increased my soa fees to $4400, still see that I’m under charging

I've costed it, if you aren't charging $5,750 you are undercharging.

It needs to get to the point that an SOA/letter of advice (some sort of formal document) is only ever required if you're recommending a product, particular in the case of product replacement. Even then that document shouldn't need to contain any educational material, alternative strategies considered or even a regurgitation of the clients own financial position. Just the recommendations, the reasons a product was selected and product fee disclosures.

Any strategic advice should just be recorded in file notes or copies of the emails that were sent.

I'm writing an SOA right now for an existing client who just wants options to reduce their out of pocket insurance costs. They've had a significant change in circumstances so it has to be an SOA, what a joke. I should be able to email them the options and my recommendation, they decide, we provide the forms, move on.

that's what other professionals do. and I, and most financial planners now have equal if not higher qualifications so this SoA ROA stuff is not required. my qualified opinion is enough.

Once again it is the product manufacturers who are the most coordinated and on point to save the industry from itself. I guess they realised, no advisers = no product being sold. The licensee I work for is currently building its own product, Marty McFly style. And so it goes on.

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