Access to financial advice for ordinary Australians has become a big theme in the media of late, and we expect the debate will continue throughout 2021. What seems to be at the core, is the increasingly restrictive regulatory framework and increasing compliance costs for Advisers which has resulted in a lack of affordability of advice, and seems to work against the increasing need for professional advice.
This is one of the themes identified in CPA Australia’s “The Value of Advice” Report, released in November 2020. If you haven’t seen it then it is definitely worth a read and can be downloaded here. Noting the increase in complexity and an ever-changing regulatory framework, the report advocates for reforms to ensure advice remains affordable and accessible. We know this view is shared amongst many in the industry, and has in fact been one of the reasons we have seen an exodus of advisers. For many, it has become unprofitable or at least unsustainable as a business venture.
You only need to read some of the forums in ifa and other advice publications to know that emotions on this subject run very high. Much of this has also been inflamed by inconsistent approaches in how advice is being governed in this country. For example, last year’s decision by the Federal Government to grant temporary AFSL exemption to accountants to facilitate access to Superannuation. Some argued this was a necessary move to help clients gain much needed access to cash through the pandemic. Others argued it was inconsistent, in that AFSL holders remained very tightly governed and not fairly treated in other areas post Royal Commission. The point being, regardless of what opinion is held on the subject, what has been highlighted in the report is that different types of advice are governed by different legislative and regulatory frameworks.
The CPA Report was underpinned by in-depth qualitative research with 20 consumers and SMEs, along with quantitative analysis involving 1,244 consumers and 815 SMEs. The results of the research confirms the need for more client-centric advice models, as opposed to the rigid product aligned model that was carried over from an advice industry of yesteryear. What is staggering is that the research references 2019 GDP data and concludes that if every Australian was able to access properly implemented professional advice, we’d each be $24,716 better off each year. That’s an annual aggregate contribution of $630B. Interestingly, and on an equally alarming note, the research shows that more than 8 out of 10 consumers and SMEs said they had greater peace of mind since receiving professional advice. “Those that do not seek advice are more likely to experience negative impacts on other areas of their life. These include mental, physical and relationship impacts.”
Access to advice is a critically important issue that really needs to be higher up on the agenda for our policy makers in 2021, as it will become an increasingly important issue for Australia. This gap between the advised and the unadvised threatens to not only impact economic growth in this country, but also will see serious social and mental health outcomes across the population of lower to middle income earners. We advocate reform to ensure that advisers are responsibly freed up to offer advice and remain a vital professional services industry that supports strong economic outcomes for Australians across the board. We also advocate more use of technology to eliminate red tape and administration, in order to free up advisers to do what they do best. Advise.