Wealth coaches and ‘finfluencers’ will be the next bubble to burst and financial planners will bear the brunt of any wrongdoing, according to the Financial Planning Association of Australia (FPA).
FPA chief executive, Dante De Gori, said the latest danger and risk to come out of the increasing cost of advice was the emergence of wealth coachers/finfluencers and advisers getting into the wholesale game to avoid obligations and regulatory red tape.
“One main reason of this emergence is that it’s too costly and complicated to deliver those services in the current regime. Financial planners should be able to service consumers at any price point they wish as it is their business models and again we don’t have to force advisers to service low income earners but there should be business models that cater for that at least more so than we do today,” De Gori said.
“We should not have to force advisers to leave the licencing regime altogether to become wealth coaches and should not be forcing advisers to go into wholesale business to avoid the red tape and to force consumers to go into a lesser consumer protected regime.
“If there’s a wrongdoing by a wealth coach or finfluencer or in the wholesale space, it’s going to come back to the planning space and financial planners will bear the brunt and that’s irrespective of who is involved and we shouldn’t kid ourselves thinking that won’t happen.”
De Gori said those operating outside the regime had no statutory obligation to act in their clients’ best interests and that they were not watched by the corporate regulatory, so consumers had no protection or compensation.
“That’s the next bubble that’s going to burst and it’s going to look bad for us if it does,” he said.
De Gori said there was a role for wealth coaches in terms of educating consumers who wanted to do things themselves, to help verify things, or to have someone coach them along without necessarily giving them advice.
He noted that there were always going to be Australians priced out of private financial advice but that in industries like medicine there was the Medicare system and in law there was Legal Aid.
“We think it should be a human right for Australians should get advice on finances and get financial control of their situation and to have access to a qualified financial planner,” he said.
“There’s a gap. At the bottom end where people are in financial crisis and debt crisis there are financial counsellors. Then there’s the point where financial counsellors won’t intervene because unless you’re in financial crisis or debt crisis they won’t help you.
“Then there’s a gap between a group of Australian who depending on what decisions they make they could be the next group of people that get into financial distress but if they make the right decisions they could be on their way to getting control over their finances. But they’re not in a position where they can afford a financial planners so there’s that gap.”
De Gori said this space could be filled with not-for-profit advice and be funded through a combination of government and industry that would fund a pool of advisers to give pro bono or to work in this space full time to support and give advice to Australians who could not afford to get advice from privately owned financial planning businesses.
“There’s precedent here – in the UK they’ve done this model specifically to assist with pensions advice,” he said.
“Something similar could be started here in terms of retirement, what to do between accumulation and starting your pension. Perhaps an opportunity that could be a starting base in which everybody who is about to retire is entitled to get independent financial advice.”
De Gori noted that the importance in this was that it was independent advice rather than intra fund advice which, he said, could never be independent.