The number of financial planners qualified to offer advice is about to fall off a cliff, while fees skyrocket, and the industry puts the blame squarely at the Coalition’s feet.
The Association of Independently Owned Financial Professionals (AIOFP) is furious with the government’s ratcheting up of compliance and costs, and says it will target Liberal MPs at the next election.
AIOFP executive director Peter Johnston told the Australian Financial Review that ahead of the upcoming federal election he will urge clients to vote against Liberals in the seats of Chisholm, Bass, Longman, Wentworth, Braddon, Swan, Boothby and Casey, which the Coalition holds by margins of between 0.5 per cent and 3.5 per cent.
The association is also considering campaigning in Josh Frydenberg’s seat of Kooyong, where the Treasurer survived an 8 per cent swing against him, the AFR reports.
Financial advice fees have climbed almost 30 per cent in the past two years as new compliance standards recommended by the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry squeeze out planners who are unable to, or choose not to, meet the new requirements.
There is a 2021 deadline to sit a new exam for qualification and more is to come. The planning industry predicts more than 40 per cent of advisers will have walked away from the profession by 2022.
Planners are now required to have at least a bachelor’s degree, and also complete a professional year, where they must pass a three-and-a-half-hour exam before they can call themselves financial planners.
Existing advisers have until the end of 2021 to pass the exam and until the end of 2025 to finish their degree.
The changes come as more baby boomers head into retirement and the advice from multiple sources is to have a clear financial plan.
With fewer planners in the field, median up-front fees have climbed well beyond $3000. Planners say their costs have risen due to the extra compliance, but they also have to cover lost commission fees, which were outlawed fro 31 December, as recommended by the royal commission.
All clients paying commission to planners on investments should have been contacted to negotiate new terms.
In December, the Morrison government introduced legislation requiring more transparency from financial advisers, especially from those claiming to be independent, and to ensure that only fees for one-off financial advice can be deducted from MySuper accounts.
The government is also seeking to simplify compliance and put the industry under one regulatory body.
Mr Johnston said the new requirements duplicated existing rules and would amount to an extra $1400 a year that advisers would have “no choice” but to pass on to clients.
He said the advice industry “has had enough of poor and unfair treatment from politicians” and was now going to exercise its political strength to get rid of the legislation and heap pressure on the Coalition.
“We are in the process of educating advisers’ clients on the facts around compliance costs and believe most will vote with their hip pocket, not blind loyalty,” he said.
“We have no choice but to act in the best interests of our members and their clients – if that means terminating political careers, then so be it.”
Daniel Brammall, president of the Profession of Independent Financial Advisers, told The Age he supported the changes, saying consumers should be paying transparent fees – fixed or hourly – and that was the way truly independent advisers charged for their services.
Last year’s Retirement Income Review found that most Australians do not seek financial advice because of the cost and a lack of trust with providers.
Have you sought advice from a financial planner? Do you believe they charge fairly for their services? Are you prepared to pay more for their services?
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