Fund new adviser entrants or extinction awaits says AIOFP

Mike Taylor

Managing Editor and Publisher

16 June 2023

Superannuation funds are likely to dispense with carrying in-house financial advisers at a cost of around $300,000 a year if they can train an employee to deliver a similar service for $80,000 a year, according to the Association of Independently Owned Financial Professionals (AIOFP).

AIOFP executive director, Peter Johnston has cited the issue as a serious problem which has already been raised by members as “the collateral damage of the expected preferential treatment of superannuation funds”.

In a message to AIOFP members, Johnston said it would have a significant effect on the recruitment of new financial advisers.

“There are always dichotomies occurring with changing momentous circumstances but on this occasion unless the Advice community does something about it, Advisers as we know them, face certain extinction,” his message said.

“Superannuation funds are expected to be given special circumstances where internal staff can be trained to give product and related information to members without the need to comply with the Corporations Law, essentially a ‘carve out’ from the prevailing law. This is where we expect the ‘good advice’ concept may be used,” Johnston’s message said.

“This will more than likely lead to Superannuation funds dispensing with carrying the considerable expense of internal fully qualified Advisers and outsource this function to the independent Adviser market who are willing to comply with certain conditions.”

“APRA are also putting pressure on Super Funds to mitigate the cost of providing advice to members, we understand some Super Funds are paying well over $300,000 pa to have an internal Adviser on their staff. This cannot continue when a Fund can train a circa $80,000 pa employee to deliver a similar service.”

“With these inevitable circumstances evolving, the expanding role of Superannuation Funds as an alternate to the past role Banks played as the ‘nursery’ for new entrants to fund the professional year expenses of an emerging Adviser will greatly diminish. With an industry financially struggling with adjusting to the new market conditions over the past decade, most Advice practices cannot afford the additional capital required to subsidise a ‘non-productive’ new staff member whilst they satisfy the professional year requirements.

“Unless there is some form of Government subsidy/relaxation or assistance from the product manufactures, Advice practices will need to find an alternative revenue stream to fund yet another expense to stay in business. If unsuccessful, extinction awaits.”

“Once Minister Jones has completed his objective of winding back the malicious aspects of FASEA/LIF/Compliance imposts legislation, we think it is time for Government to take a step backwards with getting involved with the commercial aspects of operating an Advice business and allow our industry to finally make its own professional judgements.”

“We think we deserve and have earned such consideration,” Johnston’s message said.