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Advisers looking at $100K to $200K just to open their doors

Mike Taylor28 March 2024
Regulation

Increasing regulatory costs have impacted financial advisers to the degree that they are looking find $100,000 to $200,000 a year before they can even open their doors, Parliament has been told.

West Australian Liberal Senator and former ministerial adviser, Slade Brockman pointed to the decline in financial adviser numbers and said it  had occurred “on the back of an increasingly burdensome set of red tape, regulations and costs imposed by government”.

“A financial adviser who works in the industry recently sent me a list of the costs that are imposed upon them before they even open the door—before they can even serve one client. Not all of these costs are government costs, and I acknowledge that, but significant parts of them are, and that is something that we, in this place, can actually do something about,” he told the Senate.

“I’m just going to run through some of them briefly. We’ve got the Australian Financial Services licence. For this particular adviser, you’re talking about a minimum fee of $1,500 and then another $2,800 in a graduated fee. For a securities dealer, you add $1,000 to that. Then there’s an additional fee for life insurance distribution. The new Compensation Scheme of Last Resort is likely to add something like $7,500 to that amount. Again, it’s a direct charge from the financial regulator on small financial advisors.”

“You’ve also got the AFCA levy. You’ve got public indemnity insurance and professional indemnity insurance, which can be up to $15,000 or even higher depending on the size of your practice. You’re looking at wages for your support staff, rent, software and compliance costs, including very important things like providing sufficient cybersecurity to protect client records.

“All those things are absolutely essential to have before you serve one client. But what’s this adding up to before a business can even open its doors? You’re looking at between $100,000 and $200,000 for every financial adviser before they can even open their doors and give a small amount of advice to one client—one family that wants some financial advice, one small business that wants some financial advice or an individual who’s trying to get ahead in our society.”

Brockman said that while the Coalition believed in people growing their wealth and being able to access high-quality financial advice, the Government believed in “set and forget financial futures”.

“They believe in pushing, in particular, the industry super funds so people just put their money away, then walk away and forget it. This is not the way we should be thinking about our financial future. We want Australians to engage with their financial futures, to actively engage with wealth generation and to be the best they can be as individuals, as families and as small businesses.

“One of the key components to doing that is a strong, vibrant and not overregulated financial advice sector. It’s time we had a cold hard look at the sheer level of regulation and cost we are imposing as a society and as government on this sector and think about ways we can reduce those costs and reduce that burden so more Australians can actually access high-quality advice to improve their financial futures.”

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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Jonsey is Liar
16 days ago

Let’s Add Commission Consent forms for Life Insurance, that were already disclosed and consented to in SOA.
That will help reduce Advisers costs hey Jonsey. NOT !!!!
More BS Red Tape, as they promise to Reduce Res Tape.
Jonsey, you are a fraud, a liar and corrupt to the core.

Has Shoes
16 days ago
Reply to  Jonsey is Liar

What labor politician isn’t a fraud, liar and corrupt…?

Corrupt Canberra
16 days ago
Reply to  Has Shoes

What politician or bureaucrat isn’t a fraud, liar and corrupt…?

Has Shoes
15 days ago

Thought long and hard about this…
Here’s my list of honest pollies and bureaucrats:
1.
2.
3.

Got nothing…

A dying industry
16 days ago

That figure is a conservative JOKE – you could probably DOUBLE that number and you might start to get close! ASIC LEVY, P.I INSURANCE, PARA PLANNER, ADMIN STAFF, RENT, + + + + PLUS… Then you have the limitation of CAPPED REVENUE due to a finite number of plans per week your Para-Planner can produce – coupled with HALF-COMMISSIONS on risk, with a 2 YEAR COMMISSION PAYBACK PERIOD – oh, and let’s not forget the disgruntled client paying ever INCREASING FEES to support this mess, and the client being lumbered with exorbitant and UNNESSESSARY REGULATORY PROCESS AND UNNESSESSARY PAPERWORK! ABSOLUTE MESS! The reforms have spectacularly FAILED CONSUMERS, advisers and the industry as a hole. AND THE WINNERS ARE… PUBLIC SERVANTS AND INDUSTRY FUNDS! CONGRATULATIONS!

Davey NoFurries
16 days ago

Finally someone (a very alone one at that) Senator Brockman speaking on behalf of the “hot mess” that we have to deal with every day. My vote is with Senator Brockman – goodbye Jones, goodbye Albo.

Max Tuckwell
16 days ago

At last it has been published, the govt desire to have all superannuation matters controlled entirely by the industry funds.
I am surprised this publication allowed those comments to be published. The usual censorship wasn’t applied.
The comments are true. This industry is doomed.

Matt Benson
16 days ago
Reply to  Max Tuckwell

It’s an absolute first and amazing, although bittersweet.

Ryan Dillidon
16 days ago

This would have to be the first time I can remember in over 25 years that anyone in Parliament has gone into bat for Advisers and called out the conflicted Industry Super Funds.

Monique
16 days ago

Add to that the annual external financial audit, the annual external compliance audit that is required to get the PI insurance, and the new accounting standards introduced last year that almost doubled the EOFY accounting bill. It seems like the government wants all small business brokers and planners out of business so that the market goes back to the big players. So for a Senator to basically say “suck it up” because you charge $5K for a plan when discussing the introduction of the CSLR is beyond belief.

Andy Semple
16 days ago

The Senator has significantly understated the cost of an annual PI policy. My recent renewal was $55K for 1 licensee and 5 CAR’s under the license

Andy Semple
16 days ago

I just sent this to Senator Brockman

G’day Senator Brockman,
 
I recently read this post titled Advisers looking at $100K to $200K just to open their doors published on the Financial Newswire website.
 
I have got some updated figures for you.
 
My most recent PI renewal was $53,787.69
This covers the licensee and 5 Corporate Authorised Reps (CAR’s) who operate their own business under license.
 
My most recent ASIC Industry Funding Levy for FY22/23 was $19,548
(sorry to say Senator but this was born under your Liberal colleague Senator Hume)
 
The first ever ASIC Industry Funding Levy for FY17/18 was just $3,524
So inside 6 years this (BS) levy has increased by 554%!
 
And now the Govt wants FSP’s to pay on top of very expensive PI insurance a new (BS) Levy to fund a Compensation Scheme of Last Resort. Figures being thrown around are that every FSP will get charged like $1,500 per every Financial Adviser working under a licensee. Using my licensee as an example that would be another annual fee of $7,500
 
As a holder of an AFS license we are all subject to an annual financial audit (even though in licensee’s case we do not hold 1c of client money)
Because we are required to be audited every year, we have to pay the accountants more in professional fees because they need to issue special purpose accounts. Last year Accounting and Audit cost the licensee just shy of $35,000.00
 
The we have that EDR Frankenstein monster AFCA – again created while Liberals where in Govt – which deems all FSP’s as guilty as charged and they need to prove their innocence (there is NO presumption of Innocence when AFCA receives a complaint). If a FSP decides to fight a vexatious complaint all the way to Decision and ends up winning they are subject to AFCA’s insane high fee cost of $8,090.82 + the whatever time the FSP had to put aside to fight the complaint.
Next year AFCA’s Decision fee increase to $9,304.44 (why a 15% price increase in the fee? That’s 3 times the CPI rate!)
 
And remember, ALL licenses FSP’s must be a member of AFCA. It’s compulsory and worse under the Liberals you got rid of two EDR bodies and created this one shop Frankenstein (The Liberals axed CIO and FOS so at least FSP’s had a choice on who we could join)
 
When I then add in the cost to just operate the business – rent, wages, other insurances add like another $150,000+ to the sums I have already quoted (The CAR’s under the license are contractors not employees)
 
So for licensee the cost to just keep the doors open before taking in the actual costs to run the business is over $100,000
Add the min costs incurred and we’re talking a cool $250,000
 
Financial Advice is now a luxury item to those who can afford to pay for it. The amount of red tape being applied is just insane. I do not know another profession that has had the same amount of Govt regs imposed upon it. The ASIC Industry Funding Levy is disgusting Tax they we have to pay. ASIC earns alone over $750m in annual fees to manage company registrations so why are we getting charged this BS levy?
 
So while you are right to criticise the current Labor Fed Govt for the further regs increases the Liberals need to have a hard look at themselves because it was the Liberals who created the mess to begin with.
 
Rgds
 
 

Tired Adviser
16 days ago

In the background, the Treasury looks at this article and recalculates the CSLR and ASIC Levy up for all advisers in the forward forecasts.
Again, they laugh and congratulate themselves on a Job Well Done. At the same time, the public is left clueless and loses their financial retirement to Finfluncers and Scammers. Advisers leave the industry and Australia is less Financially Literature.
End sum gain more people back on Social Security, puts more pressure on the government to fund people’s retirement.
Do you see a problem.