The advice sector has been through more turmoil in the last 2 years than it has in its entire history. The fallout from the Hayne Royal Commission in 2019 and Coronavirus this year have had systemic and long-term impacts to the sector.
These unrelated events seem to be having a pendulum effect. We have a situation where public perception has potentially gone from one of (at best) complacency towards advisers, to the worst case of being seen as villains. Today, however, you could argue that advisers are now being seen as providing an essential service, and best case, they have become heroes, helping many to navigate through these tough economic times.
This time last year I was watching the fallout of the Hayne Royal Commission and it seemed the daggers were out indiscriminately for all financial advisers and major banks. The 54 recommendations directed at the Federal Government to enact into legislation received huge exposure and the pressure was on for the Government to implement these at pace.
As the Commission was underway, the mood across the sector was largely that these changes were overdue and the industry needed a clean up. By 2019 that quickly turned to a sense that the industry was now under fire and that there were various knee-jerk recommendations being made to appease the public opinion directed at the financial services industry.
It’s often the case that one rotten apple can spoil the barrel, or in this case, a few bad advisers can wreck it for the whole industry. The truth is that only 14% of people use an adviser on a regular basis and those who don’t were probably not inclined to go racing to the aid of an adviser when they were seeing the very public dressing down of various rogue advisers during the Hayne Commission.
Having said that, I know that many have felt that the shake up from the Royal Commission will ultimately produce better outcomes for the industry. The phasing out of trail commissions; moving to fee for service; a focus on value; eliminating product-aligned advice and lifting the bar on education via FASEA will hopefully bring about a more capable and credible advice industry.
Then along rolls 2020 and suddenly we are in the midst of a global pandemic. And arguably worse than the widespread health threat to society, we are now in the midst of an even more damaging global financial crisis that threatens to dwarf the massive economic shock that occurred back during the GFC in 2008. As the government has scrambled to minimise the impact of this crisis and launched various stimulus packages to bolster the economy, we are seeing individuals and small business owners in financial distress, the likes of which we have never seen before.
It has been encouraging to observe the response by the advice industry generally and I can say from where I sit it has been positive, immediate and welcomed.
Most advisers I have spoken with in the myprosperity@home interview series have rallied to the cause in a way that speaks volumes for the value that the advice industry can and should bring to the communities they serve. Many advisers have been helping small business clients get their heads around the JobSeeker and JobKeeper initiatives and help clients navigate the application process and shore up financial support available via these programs. Many more are supporting individuals to manage budgets, preserve cash flow, trim expenses, manage debt, apply for moratoriums on rent and other financial commitments and basically help clients ride through the storm. Recognising the important role that advisers and financial institutions must play over the coming months in order to get the economy back on its feet, the government this week announced that it would be suspending its reform agenda from the Royal Commission for another 6 months to allow the industry to focus on the very important task of supporting those in need.
So the reform agenda for the Royal Commission will roll on at some stage but right now this is a great opportunity for the industry to really prove its worth. As we look forward to getting through this crisis, the role of the advice industry will be much better appreciated by the public and will bring balance back to the debate about how it needs to be structured moving forward. It’ll also likely be a leaner and more efficient industry, better equipped and enabled through the forced move to technology during this crisis.
So we are looking forward to an industry whose value is better understood; more focused on providing clear value; one that is getting closer to its clients; and underpinned by innovation and technology. That sounds like a good outcome to me.
Written by myprosperity Director Chris Ridd