When the Financial Adviser Standards and Ethics Authority (FASEA) was set up, an entire industry changed overnight – some would say for worse, others for better.
The regulatory body took aim at unscrupulous operators and created a mandatory exam intended to raise the education, training and ethical standards of financial planners and advisers.
But that resulted in more than 10,000 professionals leaving the sector.
In the wake of strict education and training rules in financial services, thousands of advisers have fled the industry in recent years.
Read: Could simple ‘tweak’ to financial advice have devastating consequences?
By the end of 2023, experts say there will only be about 13,000 financial advisers in Australia.
While the industry is unhappy with these changes, consumer groups say it’s a good thing for Aussies seeking quality advice.
While there are helpful free services like Moneycare, good financial advice could still be well worth paying for.
More regulation means better-quality financial advice
While FASEA has since been wound up and replaced by ASIC’s Financial Services and Credit Panel, the body immediately made its mark by forcing those in the industry to either take – and pass – a financial adviser exam or give up their practice.
While many in the industry were firmly against FASEA due to confusion around the new ethics rules, it’s safe to say it drove out plenty of practitioners who might otherwise be giving regular Aussies poor financial advice.
Read: ASIC reveals litany of underpaid insurance claims
In the space of just a few weeks (23 December 2021-13 January 2022) more than 600 advisers left the industry as a result of the FASEA exam.
After recommendations from the financial services royal commission, FASEA was shut down and ASIC’s powers were extended in order to establish a single disciplinary body for financial advisors.
ASIC has taken to its new role with force, cracking down on financial advisers and their licensees in order to stamp out unethical practices in the financial advice sector.
Beware collateral damage: While it’s true that stricter standards have forced countless inexperienced practitioners to give up their financial adviser roles, it also risks tarnishing the reputation of many highly qualified financial experts.
That’s why some experts are calling for older advisers to be grandfathered in – or we risk losing their expertise forever.
Quality new services are popping up
Good financial advice is worth its weight in gold, but just a single piece of bad advice could ruin your life.
The good news is that with tougher standards around financial services, it’s creating a market where more free services can be delivered to everyday Australians.
The Salvation Army recently launched Moneycare – a free and confidential financial counselling service available to anyone and everyone.
The Salvos have consistently tried to help everyday Australians who are struggling financially, especially with modern problems caused by buy-now-pay-later (BNPL) loan schemes.
While the Salvos’ service is free, that doesn’t necessary mean it’s the best advice you can get. There are plenty of high-quality financial advisers out there who can help you generate wealth.
Steps to find the best financial advice
A free service like Moneycare is a helpful tool, but it’s just one piece of the puzzle.
People across all walks of life have their own unique circumstances and their own unique financial struggles.
That’s where a financial adviser can help – by understanding your situation and delivering relevant advice, rather than broad strokes.
Here are a few quick steps to find quality exceptional financial advice:
Prepare everything in advance. Organise your household budget, calculate your assets, write down your financial goals and clarify how much of a risk-taker you are.
Do your research. Don’t just choose the first name that pops up in Google. Reach out to several different financial advisers or organisations and meet with them individually.
Vet the experts. Request that they provide you with their Financial Services Guide (FSG) – then read it!
Read: An annuity could help you increase your Age Pension
Ask the tough questions. Have them answer questions around the specific services they can provide, any limitations to their advice, as well as who they represent (e.g. certain lenders).
Cover yourself. Ask about their professional indemnity insurance – including how much it covers – and find out exactly how much you’ll be paying them for their advice.
The insider’s take
Our resident life insurance expert and financial adviser Lisa Varker says that things have changed a lot since FASEA was set up including:
- Some advice fees for life insurance are now waived by financial advisers in lieu of commissions paid directly from the companies.
- Financial advisers can no longer hide fees and commissions – everything has to be disclosed.
- At the same time, many fees have now been reduced or banned by FASEA as well.
- Fees will vary for advisers, and they can charge hourly. I know some insurance advisers who charge an initial consult fee of $250 to cover expenses too.
What’s the bottom line?
Do your research.
Trust your gut.
And don’t be afraid to walk away if you aren’t getting what you need from your current financial adviser.
Are happy that the financial advice sector is going through a big makeover? Will that make you more likely to seek financial advice? Have your say in the comments section below.
This article originally appeared on Expert Analysis and has been republished with permission.
*The information contained in this article is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
