Advisers ‘undeterred’ by increasing regulation and compliance
While the FASEA education requirements and increased compliance and regulatory requirements are placing increased cost pressures on advisers, recent research indicates that only a small proportion of advisers intend to leave the industry.
According to the 2019 Licensee Satisfaction Report by Investment Trends, the advice industry remains resilient despite more compliance and regulatory requirements on the horizon.
The report was based on an in-depth study of 1,030 Australian financial planners and their business support needs.
The report indicated that with advisers adjusting to FASEA’s education requirements and other regulatory changes, advisers have become increasingly concerned about serving clients in an affordable manner.
More advisers are facing obstacles in providing affordable advice, according to the report, with 43 per cent listing this as a concern this year versus 33 per cent in 2018. The report also indicated that 39 per cent of advisers are finding it difficult to reduce the cost of advice, up from 27 per cent last year.
Despite concerns about heightened regulation adding time and cost pressures to their business, Investment Trends research director Recep Peker said the majority of advisers don’t plan to leave the industry.
The research indicated that only 11 per cent of financial planners said they intend to leave the industry if the full recommendations of the royal commission are implemented, while 7 per cent said they would cease providing advice when FASEA’s education requirements come into effect in 2024.
Mr Peker said the research also showed that advisers recognise the need to evolve their business not only to satisfy regulatory standards, but also to meet the demands of shifting consumer preferences and an uncertain investing climate.
When asked how the royal commission will impact their planning practice, 69 per cent of planners intend to accelerate their adoption of technology to better serve their clients.
“By using technology more effectively, planners believe they can enrich their client engagement capabilities, helping them better demonstrate value to existing clients and to expand their pool of potential clients,” Mr Peker said.
The trend towards self-licensing is also on the rise, according to the research, with almost a quarter of financial planners now stating that they either operate their own AFSL or belong to a self-licensed boutique, which is up from 15 per cent five years ago.
In the next 12 months, a further 10 per cent said they intend to take the same route.
“More planners are moving away from the traditional licensee model, believing they can deliver better outcomes for the end client by taking full control of their operating environment, value proposition and product set,” Mr Peker said.
Looking forward, most financial planners will continue to rely on the dealer group model, with 55 per cent intending to remain with their existing dealer group.
A further 10 per cent intend to switch to another dealer group within the next 12 months, according to the report.
“Dealer groups remain the backbone of the financial planning industry, and many planners believe that the support, guidance and services provided by their dealer group outweigh the self-licensed model,” Mr Peker said.
“Still, dealer groups can do more to support their network of financial planners. Among those who are part of a dealer group, nine in 10 seek further assistance from their dealer group — from support with lifting back office efficiency to ongoing client engagement.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.