There was a time, more than a decade ago, when Money Management’s Top Financial Planning Groups research would reveal groups such as Professional Investment Services (PIS) as having the most financial advisers, albeit that the average level of wealth held by clients was comparatively modest.
The reason that PIS advisers, and indeed AMP advisers, could service large numbers of clients of comparatively modest means was not related to their generosity. It was related to the existence of commission-based remuneration structures and the reality that volume rebates were being channelled to financial planning dealer groups by a variety of product manufacturers.
Bluntly, the delivery of affordable advice was being delivered as a result of subsidisation by product manufacturers.
All that changed in the face of the anti-commission campaign initiated in large part by industry superannuation funds which gave rise to the Future of Financial Advice (FoFA) legislation and the raft of regulatory initiatives which have attached to that legislation.
Fast forward to 2021 and the reality that the dealer group that was PIS is now under the umbrella of the publicly-listed Centrepoint Alliance, that AMP is itself dropping sub-scale advice firms, that the Minister for Superannuation, Financial Services and the Digital Economy, Senator Jane Hume, is talking up the need for making advice more affordable and the Australian Securities and Investments Commission (ASIC) is undertaking an Affordable Advice Review.
Also, in 2021, is the harsh reality that financial advisers have been openly culling their client lists of those who they assess as being low-balance and high maintenance with the result that hundreds if not thousands of those clients are now finding themselves “orphaned”.
Little wonder, then, that as part of its Affordable Advice Review process ASIC has appeared drawn to advice delivered under the auspices of superannuation funds or via algorithmic/robo advice.
So, the end game may well be one in which instead of affordable advice to the masses being delivered as a result of subsidies provided by product manufacturers it is, instead, the result of subsidies provided by superannuation funds with algorithmic/robo advice providing an entry point.
So, the question arises. Are low-balance clients going to be any better off under the evolving new regime or were they actually better-served in the supposedly conflicted old regime of product subsidies and commissions?
No one is suggesting that the provision of financial advice should go back to pre-FoFA days, but it is clear that a succession of policy-makers in Canberra have failed to understand the implications of their legislative actions and to identify a sustainable end-game.
In the meantime, and despite successive surveys confirming the value of professional financial advice, thousands of clients are finding themselves orphaned and with few affordable options at a time when the investment environment has rarely been more complex.
In all the circumstances it is arguable that post-FoFA and in the wake of the Royal Commission, it is not financial advisers who have failed their clients, it has been a succession of Governments, policy advisers and inappropriately politically-ambitious senior executives within the financial services regulators. Their legacy is there for all to see but they do not want to own it.
