The cost of financial advice could rise for clients in the short-term as advisers review their clients’ financial plans in light of the Budget changes to superannuation, and legislation limbo until the Federal election on 2 July, an industry body said.
The Association of Financial Advisers (AFA) chief executive, Brad Fox, said advisers were in a position where they needed to provide scenario advice to their clients based on where the rules and legislation may or may not end up.
He cited an example where a client might have begun a multi-year strategy to contribute more than $500,000 of non-concessional contributions two years ago as part of a five-year plan.
“Well, now that plan may well have to be revisited and re-written because they have been intending to exceed that $500,000 limit.”
“This is where the retrospective application in regards to non-concessional contribution caps is very disappointing to see.”
The possibility of a rise in advice costs meant the onus was on the adviser to justify the costs by providing complex advice across a myriad of issues such as superannuation, taxation, debt reduction, family inheritance, and estate planning.
“The complexity across both wealth and lifestyle issues for people is where financial advisers will add the most value for their clients, and therefore can charge higher fees because it’s appropriate to the value,” Fox said.
He also warned that with the emergence of robo-advice and fintech, advisers risked being caught in the trap of being an intermediary, which meant they risked being squeezed out due to several factors.
This included their shrinking margins, new competitors delivering intermediary services more efficiently, and product manufacturers going directly to the market, and eliminating the intermediary altogether.
“The future for financial advisers is to not be caught there. It’s to move to a position where they are not seen as access to information and product, but rather the advice they provide is its own commodity and value and that’s why people go and see them,” Fox said.
