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 professional.
That is the bottom line assessment of the Financial Planning Association (FPA) contained in a supplementary submission to the Government’s Retirement Income Review with the planning organisation arguing that the Government must investigate recent increases to regulatory costs and carefully consider its reform agenda.
The submission said that financial planning in Australia was going through an unprecedented period of change and that the totality of these changes was affecting the long-term viability of the financial planning profession.
“Addressing misconduct and creating industry-wide ethical and educational standards is a necessary part of professionalisation and we support the regulators’ work to achieve this. The Financial Services Royal Commission revealed practices which are inconsistent with a modern profession and must change to restore trust in Australia’s financial services sector,” it said.
“However, new standards are applying on top of an already complex regulatory framework that has evolved over several decades. While the FPA supports the introduction of many of these reforms, the rapid increases to the cost to practitioners of additional regulation are a serious risk for small and medium-sized financial planning businesses.
“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.”
The FPA has recommended that the Government establish the scale of the challenge facing Australians in affording personal financial advice, particularly due to escalating regulatory costs.
“The FPA recommends that the Government, through ASIC, monitors the increasing cost to practice as a financial planner, including through government fees and charges, cost-recovery levies and increases to professional indemnity insurance premiums, and the impact this is having on the affordability of financial advice,” it said.