‘Urgent’ need to reform financial advice bill: professional bodies
A coalition of professional bodies and industry groups have called for “urgent” changes to a reform package that would make certain financial advice even less accessible and more costly.
Leading industry and professional bodies have warned the government its financial advice reform bill makes certain financial advice less affordable and accessible to consumers.
Ironically, the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill was introduced with the opposite aim in mind.
“The government needs to make urgent changes to the legislation to make advice more accessible and affordable to consumers to provide a way forward that is not unworkable and worse for all than the current situation at law,” wrote the Joint Association Working Group (JAWG) in a public statement.
JAWG – a coalition of the major accounting, financial adviser, stockbroker, super, and investor industry and professional bodies – said the legislation will add greater complexity to consumers dealing with superannuation trustees.
Upon announcing the bill, Financial Services Minister Stephen Jones said the legislation will “streamline the delivery of financial advice by consolidating fee documents for ongoing fee arrangements into one simplified document and allows more flexibility in how financial services guides are provided.”
In the bill's current form, superannuation trustees that allow fee deductions will be required to check each piece of advice individually and to reproduce checks already carried out by financial advisers and their licensees.
“Consumers will face more red tape when it comes to setting up an ongoing adviser arrangement with superannuation trustees to pay for advice, with no additional consumer protections,” they said.
This is contrary to the “consistent” suggestions provided by professional advisers, superannuation trustees, and advice licensees.
“Advice in Australia is unaffordable and inaccessible, with the cost of advice in Australia currently out of reach for many consumers, costing more than $5,000 in many cases,” wrote JAWG.
The submission is only the latest example of concerns being raised around the affordability of financial advice in Australia.
The bill acts on several aims of the government’s Delivering Better Financial Outcomes package, which came from the 2022 financial advice review chaired by Allens partner Michelle Levy.
The government embraced 14 of the review’s 22 recommendations in part or entirely and has begun rolling out legislation to enact those changes.
That review found the existing financial regulatory framework had become an “undoubted impediment to consumers being able to access affordable financial advice.”
That review also found that between 2018 and 2021, the median ongoing advice fee increased by 41 per cent from $2,510 to $3,529 while the average cost of advice was between $4,545 and $5,629 while 88 per cent of advisers charge fees of $2,000 or more for initial advice.
The increasing median cost of ongoing advice inversely mirrored the declining supply of financial advisors over a similar time frame.
Treasury estimated the number of financial advisers in Australia had nearly halved in the four years between December 2018 and December 2022 (from 28,522 to 16,049).
Many attribute the fall to the Hayne Royal Commission of 2019, which “added greatly to the cost and complexity of running an advice practice,” according to Phil Anderson, general manager at the Financial Advice Association of Australia.
“The consequences [of the Hayne Royal Commission] for the reputation of the financial advice profession were drastic and deeply disturbing,” he wrote.
According to Jones, the exit of so many financial advisers has left an “advice gap” that leaves room for unregulated advisers to fill.
“I don’t just mean Uncle Bob at the BBQ. But ‘finfluencers’. Unlicensed online advice. And scammers,” he said in a speech to the Association of Superannuation Funds of Australia.
“Getting more professional advisers qualified and into the practice is important. It needs to happen.”
