The recommendations to change the regulatory framework in advice put forward in the Quality of Advice Review (QAR) proposal paper will help stop declining financial adviser numbers in Australia, a research firm director has suggested.
Last year it was reported that the number dropped below 19,000 and is predicted to reach 13,000 by the end of 2023, while a report released this week by Investment Trends found that one in four financial advisers are expected to leave the industry within the next five years.
Speaking to ifa following its release, Investment Trends’ research director, Dougal Guild, revealed that of the advisers suggesting they intend to leave the industry in the next five years, a quarter of those are aged 60 years or older and some are simply moving into retirement.
“Generally however, advisers have cited ‘compliance burden’ as the main challenge they deal with in their business for many years now, closely followed by ‘regulatory change/uncertainty’,” Mr Guild said.
“Administering fee disclosure and client opt-in was cited in our latest survey as a specific example of this ongoing regulatory change and compliance challenge. Ultimately, this leads to an increase in the cost of providing advice and an inability to provide that advice to those less wealthy clients who need it.”
Mr Guild referenced the recently-released QAR consultation paper, in which Treasury wrote that “it is clear the current regulatory framework is a significant impediment to consumers accessing financial advice” and that “the purpose of the review is to consider whether changes should be made to the regulatory framework applying to financial advice to improve the accessibility and affordability of financial advice”.
“Although the focus of these comments relates to consumers accessing advice, the flip side of this is that proposed changes to the regulatory frameworks should also make it easier for advisers to provide that advice to consumers,” Mr Guild said.
In the paper, QAR reviewer Michelle Levy confirmed she believes changes must be made to the regulatory framework and put forward a number of proposals, including that the financial services regime should regulate the provision of “personal advice” which should be “somewhat broader” to ensure clarity.
Submissions for the QAR consultation paper are now open and will close on 16 September 2022.
Meanwhile, Investment Trends’ 2022 Adviser Business Model report found that 37 per cent of advisers intend to switch licensees and 70 per cent of those suggested they’ll switch to a self-licensed model. It was also reported that that the total cost of providing financial advice to the typical client has increased from $2,850 in 2020 to $3,280 in 2022.
