Keep wholesale advice regime or risk more orphan clients
The number of orphan financial advice clients will likely escalate if the Government changes the wholesale investor test as accessing retail advice is both difficult and expensive, a Parliamentary Committee has been told.
As well, the Parliamentary Joint Committee on Corporations and Financial Services has been told by Ord Minnett chief executive, Karl Morris, that Government policy has already resulted in the creation of a two-advice market – one for the wealth and one for retail.
Giving evidence before the Committee review of the Wholesale Investor regime, the Stockbroker and Investment Advisers Association (SIAA) chief executive, Judith Fox also revealed that her organisation is currently in discussions with Treasury about introducing more flexibility in adviser education standards to attract more new entrants.
Fox reinforced why her organisation wanted no change to the wholesale investor regime stating anything that moved wholesale clients to the retail category could result in a very poor outcome for those clients.
She said this is because the current regulatory environment makes it hard and expensive for retail clients to receive financial advice and there are too few financial advisers to deliver financial advice to all who need it.
“Indeed, many retail clients have been orphaned over the past few years due to the lack of financial advisers therefore clients who are recategorized from wholesale to retail will find it very challenging to find a retail adviser who can give them the advice they want and they would also become orphan clients vulnerable to social media as their source of advice,” Fox said.
“Since we provided our submission to this committee the number of financial advisers in Australia who are authorised to provide personal advice to retail clients has dropped from 15,597 to 15,511 and 2018 there were 28,353 advisers.”
For his part, Morris told the committee that a two-advice market had been created – one for the wealth and one for retail – “exactly the outcome the Government didn’t want”.
“I can’t think of another profession which has the bulk of its members being regulated and educated and others not. We now have advisers and firms who can’t or won’t advise retail clients which specialise in wholesale only,” Morris said
Fox pointed to the fact that the advice sector is currently in the middle of delivering better financial outcomes reforms that the Government has underway to seek to reduce red tape to make it easier and cheaper for consumers to receive advice.
“However, we don’t yet know whether those reforms will have that result,” she said.
“We are also in discussions with Treasury about introducing greater flexibility in the education standard that we hope will increase the number of new entrants to the financial advice profession as currently it is so prescriptive and narrow that only 381 new advisers commenced in 2023.”
“So, until we fix the process or providing advice to retail clients and create a pathway for new entrants to the profession making a fundamental change to the wholesale client test that might see wholesale clients recategorized as retail clients will have a substantial impact on them.”
“the advice sector is currently in the middle of delivering better financial outcomes reforms that the Government has underway to seek to reduce red tape to make it easier and cheaper for consumers to receive advice”.
Hilarious.
Make it all the same rules as wholesale has now or none. Tiering is bizarre and an acknowledgement of over regulation which only assists the rich.
Very sensible positioning Judith: So, until we fix the process or providing advice to retail clients and create a pathway for new entrants to the profession making a fundamental change to the wholesale client test that might see wholesale clients recategorized as retail clients will have a substantial impact on them
It is total rubbish to say “too few financial advisers to deliver financial advice to all who need it. Indeed, many retail clients have been orphaned over the past few years due to the lack of financial advisers”.
This is a furphy – there is not a lack of advisers. Instead the rules make it so hard (and expensive) that only few Australians can afford advice.
There is zero upside and a heap of downside dealing with retail these days. Smart advisers either have moved to general advice or move entirely to wholesale investors.
Good work Liberal Party for allowing this to happen in 2018/2019 and awesome work ASIC/AFCA and Big Education for making financial advisory a joke.
Hang on,hang….. does the SIAA not know that the Minister in on public record as saying words to the effect of; he was happy for the wealthy to go see a select group of Financial Planners, and they’d always be that need, but as for the rest of ordinary Australians they’d be seeking advice via their Super fund and we want to make it easier for those funds to provide advice?
Not sure where they are getting the “Morris told the committee that a two-advice market had been created – one for the wealth and one for retail – “exactly the outcome the Government didn’t want”.” …because that is exactly what the Government wants, and the Assistant Finance Minister Stephen Jones in on record saying that’s the plan.
Seriously ARE WE ASLEEP.