The financial services sector wants consumer protection laws watered down, claiming they are pushing the cost of financial advice beyond most Australians.
The Financial Services Council (FSC) has released a plan proposing the scrapping of statements of advice (SOA) in favour of a cheaper “short, concise, consumer orientated” record of advice (ROA) document.
“The financial advice industry is facing significant challenges, with rising regulatory requirements and cost pressures undermining the economics of the sector,” FSC chief executive Sally Loane told the AFR.
“Our aim is to lower the cost of providing financial advice, without undermining the quality of advice provided to consumers or eroding important consumer protections.”
The Financial Standard reports that IOOF’s The True Value of Advice report, which canvassed over 12,600 participants, revealed that “almost half of Australians who have never connected with a financial planner are willing to do so”.
“Barriers to receiving advice included many believing they do not have enough money or assets, and that the timing . . . is not right. Many also said that they couldn’t afford financial advice.”
IOOF chief advice officer Darren Whereat said: “Australian financial services licensees must commit to supporting and helping advisers deliver advice to clients in an efficient way that not only makes advice practice businesses valuable and sustainable, but also helps to remove perceived barriers to seeking advice and makes advice more affordable, more accessible, and more engaging for more Australians.”
Corporate regulator the Australian Securities and Investments Commission (ASIC) has granted financial advisers a six-month extension on coronavirus relief measures that reduced contentious SOA paperwork as long as 80 pages and costing up to $3000.
The temporary relaxation of red tape has been extended to October. The Association of Financial Advisers (AFA) lobbied for extension of the relief measure, then for it to be implemented permanently.
“The cost and time frame for the delivery of financial advice is a genuine issue and this relief measure will make it easier for financial advisers to provide cost-effective and timely advice to their clients who are still struggling with the economic impact of COVID-19,” said acting AFA chief executive Phil Anderson.
Xavier O’Halloran of Super Consumers Australia told the AFR that the sector needed to do more to improve the “trustworthiness of advice” to improve consumer confidence after the Hayne royal commission exposed scandalous practices in the industry.
Read more: How the royal commission into banking and finance affected retirees
A survey commissioned by the Financial Services Council found 64 per cent of consumers endorsed the idea of red tape reduction for financial advisers if it meant access to cheaper advice.
And a Rice Warner researcher called for simple advice about financial products to be provided by bank branches or call centre employees rather than fully qualified financial planners.
Pamela Souvlis, head of society at Pollinate, labelled financial advice a “mysterious, complicated and often precarious process and potentially very costly”.
The FSC report, commissioned from Pollinate, found people’s expectations of rates for simple personal advice range from $250 to $500.
“After $500, demand falls quite steeply,” the report found.
The median fee for advice in 2020 was $3256.
The research found only 18 per cent of Australians are likely to seek financial advice in the next 12 months.
Read more: Re-educating financial advisers
Consumer advocate CHOICE railed against any relaxation of rules governing financial advice last year when the COVID measures were announced.
“We’re still only part way through the reforms that came out of the GFC. We haven’t finished the task of cleaning up the industry,” CHOICE chief executive Alan Kirkland said in April 2020.
Financial Planning Association chief executive Dante De Gori called such comments “slanderous”.
After the Hayne royal commission, some pundits predicted the demise of the financial advice industry after its report exposed conflicts and misconduct including scandalous practices of fees for no service, in-house product sales and customer harm.
In the report, commissioner Kenneth Hayne said a “sales-driven, commission-based culture” were the roots of the financial planning industry and financial advisers had to now put “client’s interests above their own financial reward”.
How much are you prepared to pay for financial advice? Do you need expert assistance planning your financial future? Do you trust the financial planning industry?
Read more: Accessing free financial advice
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