In her first appearance as chief executive of AMP, Alexis George said most consumers were unable to afford financial advice at a time when Australians had accumulated – and would need to spend in retirement – a record $3.3 billion in superannuation.
“Good advice is the difference between a great retirement and an okay retirement,” she said. “But as an industry, we’ve got to get that model right and I don’t think we have it right yet. We’ve got to find the right mechanism to be able to offer advice to everyday Australians.”
Netwealth managing director Matt Heine said the retreat of the major banks from the sector since the royal commission had inadvertently ended the major education and training resource of new advisers.
“We’ve got a real problem with trying to find advisers to come into the industry now,” he said.
“The banks have always invested heavily into grad programs and the different programs to get that next generation of advisers through, and today we really haven’t seen anyone sticking their hand up to say, you know what, this is this something that we’re going to spearhead and that we’re going to do.”
Kate Howitt, portfolio manager of the Fidelity Australian Opportunities Fund, said financial advice had become a “luxury good” reserved for the wealthy. “We want a more democratic society than that,” she said. “We need to find some way of getting more basic levels of advice and education out there.”
The sentiment among industry leaders was echoed by Australian Securities and Investments Commission chairman Joe Longo, who said the regulatory regime was “too complicated”.
Simplify the laws
“It is an area that does worry me,” Mr Longo, who was installed in April as part of Treasurer Josh Frydenberg’s push for a more business-friendly regulator, told the Summit.
“What we’ve been trying to do is work with industry to find ways of complying with the regulation in a manner that doesn’t over-engineer the approach to compliance.”
The median price of professional financial advice increased by 16 per cent last year to $3256 a year, according to research house Adviser Ratings. The number of advised Australians fell from 12.2 per cent to 11.2 per cent of the adult population.
Mr Longo backed the work of the Australian Law Reform Commission, which has been examining ways to simplify the laws governing financial advice.
But Financial Services Council chief executive Sally Loane warned any reform recommended by the commission could take a decade or more to be implemented, and said the need to boost access to advice during the recovery from the coronavirus pandemic was urgent.
“We’re not going to wait that long,” Ms Loane said. “We’d encourage the government to take up some of the [FSC’s] recommendations.”
The peak body for fund managers and life insurers recommends scrapping “statements of advice”, which have become “unwieldy”, sometimes running to as long as 80 pages and, at a cost of $2400 to $3000 each, identified as the main driver of higher fees.
It has also proposed scrapping the so-called safe harbour provisions in Labor’s landmark Future of Financial Advice reforms.
“We’ve got a model now if the government looks at it and instigates some of those changes, it means that we will be able to reduce the cost ... of advice per client by 30 per cent,” Ms Loane said.
As well as removing red tape to get more consumers in the door to see a professional adviser, IOOF – which will rebrand to Insignia Financial if shareholders approve the proposal at the company annual general meeting on Thursday – will experiment with “financial wellness coaching”, Mr Mota said.
An average couple running a family in the suburbs will have superannuation accounts, likely a mortgage, and need guidance about personal finance basics, rather than advice around complex investments.
Under the law, financial advice is classified as a recommendation to purchase a financial product based on a client’s personal circumstances. But Mr Mota said he was working on a business model that stopped short of that.
“You don’t need to be a licensed financial adviser to help people with cash flow,” Mr Mota said. “There is plenty of scope to help people outside of the personal advice regime, and I’m not sure we’re fully explored that today.”
Consumer groups have warned against rolling back regulations introduced in response to a string of financial advice scandals. Choice chief executive Alan Kirkland has said the financial advice industry is still too conflicted to be trusted.
The government will conduct a Quality of Advice Review next year in line with a recommendation of the Hayne royal commission. Financial Services Minister Jane Hume has said that review will also examine affordability of advice following concerns about the rapidly escalating costs.
Senator Hume has backed calls to remove some red tape from the advice process, such as ASIC’s coronavirus relief measure to temporarily replace SOAs with the less onerous records of advice. But she has ruled out rolling back the education reforms, under which all advisers must pass a national exam and obtain an approved university degree.