Fund new adviser entrants or extinction awaits says AIOFP
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.
The AIOFP seems to suffer from wild irrational mood swings. In February they said in an email to their distribution list “The AIOFP chose to not support the Levy QAR from the beginning”. A couple of days ago they said “QAR response a ‘Euphoric Day’ for advisers” and a “huge step in the right direction”. Now in this latest statement on the QAR response they are talking about the ‘certain extinction’ of financial advisers. This series of extreme statements might appeal to those who are inclined to cultivate conspiracy theories and who like a bit of unhinged dramatization. For the majority, it is just a bewildering series of incoherent meaningless ramblings.
ISA call centre backpacker jockeys on $80k pa flogging ISA only funds & insurance with zero skills, zero education, no regulation and no regulatory risk as ASIC already allow them to do this but now it will be mass marketed, already seeing TV adverts.
And yep all paid for by hidden commissions, mostly for no service and certainly no member consent required.
Living the dream ISA style.
Peter may make some offbeat comments but he does have a point that begs massive regulatory scrutiny.
How do ISA call centre jockeys be gifted a regulatory free ride / massive carve out.
Vs
Real Advisers, providing real advice yet still drowning (in some what to be seen slightly reduced) BS mass strangulation by over regulation.
COMPARE THE PAIR ??????????
What a wonderfully corrupted level playing field.
On 9 June 2023, the AIOFP issued an email to their distribution list that strongly plugged industry funds, including making the following statement:
“Then google the best and the Industry Funds dominate.
Advisers in the past have reported that clients favourably respond to them offering an Industry Fund as an option. The industry funds have spent plenty on consumer education and we should no longer see them as a threat, we should embrace them.”
It seems that you have not joined Peter in this warm embrace of industry funds. Your claims are however factually incorrect. Whatever happens in the super space, it will not be a matter of zero skills, zero education, no regulation and no regulatory risk. At present, personal advice provided by super funds must meet all the obligations that apply to other financial advisers. The only difference is that they can collectively charge for certain types of advice that fit within the definition of intra-fund advice. Let’s wait for the outcome, however it will not be as you have described – a regulatory free ride / massive carve out.
So Industry Super spend 20 years beating the crap out of Advisers and liken Adviser Commissions to criminal theft. And ensure Commissions are banned for Advisers.
But wait, ISA has an idea, call it something different.
COLLECTIVE CHARGE huh huh huh huh what a joke = HIDDEN COMMISSIONS, and for most Industry Super Members for NO SERVICE.
So now Industry Super are the biggest receivers of Commissions, the worst Commissions that are not disclosed and cannot be opted out of.
So every member of Industry Super is paying for Intra Fund Sales Advice when 90% of members pay this Hidden Commission for NO SERVICE.
And the same Intra Fund Sales Advice is provided by uneducated, unqualified, unregulated call centre jockeys.
And to top it off this Sales Advice only sells a single vertically owned Industry Fund and Insurance.
It’s not real Advice, it’s simply product info and sales.
Can’t wait for this model to be expanded 10 times bigger.
The Hypocrisy of Industry Super knows no bounds.
$80,000…you don’t need to pay that much to have a backpacker read a scrip. Having worked in one fund I can attest I said “I recommend you salary sacrifice” 20 times a day, whether it was people struggling with debt, thinking about an investment property etc etc as the solution to all sorts of financial problems. Having also worked in a Bank in a non-advisory role I thought Banks trained their staff well in sales. I quickly learned about sales and what happens when you provide advice and not focus on gaining more FUM. Working as an Adviser in a super fund was like a scene out of Wolf of Wall Street. Peter Johnston thinks Super funds will refer clients to Advisers, well I’m convinced Peter is Peter Pan living in fairy land, over dosing on that sprinkled dust from those Labour politicians that spoke at his 2021 pre-election conference, still angry that Liberals didn’t want to attend.
People are reacting like this was unexpected. The whole purpose of the delay by Jones was to make sure industry super funds got an advantage. Backpackers working in a call centre are now going to be the core people responsible for the provision of “financial advice” in this country. I am sure however their “advice” won’t be conflicted just because they are being paid by the company whose product they are flogging.
I just wonder when the govt will say to investors ‘you also need to take some responsibility with your investment decisions’
the dice is so stacked dealing with AFCA that to them every investment recommendation given and acted upon should be guaranteed…
Stocks sometimes go down…weird concept I know….