CFS data confirms tripling of $500,000 plus advice clients
The degree to which the cost of advice has cut the ground from under low balance holders has been laid bare by Colonial First State (CFS) which has revealed a 40% decline in customers with balances less than $150,00 over the past five years.
At the same there has been a tripling of advised customers with over $500,000.
Those represent two key data points in the CFS submission to the Quality of Advice Review (QAR) which states that the impact on low balance clients is inarguable.
The CFS submission argues that the problem cannot be addressed via fine-tuning and that meaningful reform will be necessary.
“Over the last decade, we have seen a significant reduction in the number of registered financial advisers and a fall in the overall number of Australians who are able to access financial advice,” it said.
“Further, for a number of reasons, it appears that the amount of new advisers joining the industry is insufficient to replace those advisers who are leaving. Research examining this issue suggests that the ratio of advisers leaving the industry versus those replacing them could be as high as around six-to-one.”
“Should this continue, the already significant challenges associated with accessing affordable financial advice are likely to be exacerbated.”
“These trends are disproportionately impacting on, and reducing access for, those with lower account balances and/or those who are seeking relatively simple and often single-topic financial advice. This often includes those with lower incomes and women who are less likely to have the financial means to afford financial advice under the current regulatory regime,” the submission said. “As the review recognises, this trend is now unarguable.”
“Over the last five years alone, the number of advised customer balances that are less than $150,000 has more than halved, from around 40 per cent in 2019 to less than 20 per cent today. At the same time, the number of advised customer balances over $500,000 has more than tripled.”
“Fees associated with a statement of advice have increased by around 40 per cent to over $3,500 for the typical client over the same period.”
The submission said the scale of this challenge means it will not be solved by fine-tuning the existing regime. Without meaningful reform, increasingly only wealthy Australians will be able to access personal advice.
We believe the proposals put forward in the review are a step in the right direction and deserve careful consideration. We are also not aware of any alternative proposals that have been put forward which strike a better balance between quality and affordability.
This review provides a timely opportunity to rebalance the regulatory regime such that all Australians have the opportunity to access financial advice to improve their financial wellbeing.
CFS says they are “not aware of any alternative proposals that have been put forward which strike a better balance between quality and affordability.”
Well CFS, perhaps you should take a look at many of the other QAR responses.
Michelle Levy’s QAR proposals are a mix of sensible reductions to red tape for genuine advisers, and outrageous consumer protection carve outs for product companies.
Less conflicted responders to QAR have sensibly suggested rapid implementation of the former, and ditching the latter. A much better balance between quality and affordability.
CFS would also do well to avoid extrapolations of recent short term decline in adviser numbers to support their lobbying position. If the same flawed extrapolation technique was applied to the performance of CFS funds, they would be worth zero in a few years and investors should be withdrawing their money ASAP.
Bring back my sales channel….Bring back my sales channel….bring back my sales channel.
We are screwed now, we now have the banks and union funds collectively against us and a current consultation process run by Sir Humphrey Appleby; “never hold an enquiry unless you already know the answer”.
Such a shallow, self interested position from a product provider, even a blind person could see though their thinly veiled BS and self interest.