Industry organisations are disagreeing over how many jobs may be lost as a result of the implementation of the proposed Future of Financial Advice (FoFA) reforms.
The Association of Financial Advisers (AFA) and financial services giant AMP have estimated job losses in the tens of thousands. In contrast, Rice Warner, on behalf of the Industry Super Network (ISN), has released new research which estimates the number of advisers will reduce by a few thousand, significantly less than the AFA and AMP estimates.
Commenting at the AFA’s 2012 GenXt National Roadshow series, AFA CEO, Richard Klipin, said that if the reforms went ahead without amendment, 35,000 people across the financial advice profession would lose their jobs.
“If we accept the evidence, supplied by the Government in the Explanatory Memorandum attached to Tranche 1, then 6,800 adviser roles will be wiped out,” Mr Klipin said. “Extrapolate that number out to include the five or six ancillary staff each small business adviser currently employs and you’re looking at about 35,000 jobs.”
Late last month, AMP voiced similar concerns about potential job losses across the industry. Speaking in front of the Parliamentary Joint Committee on Corporations and Financial Services (PJC), AMP’s Managing Director, Craig Meller, said the group believed the FoFA Bills, in their current form, would lead to job losses in the industry of up to 25,000. “Our view is that, holistically, there is a real shortage of capacity to deliver quality advice in Australia today and that any reduction in the number of financial planners will reduce that capacity to provide financial advice,” Mr Meller said.
Also present at January’s PJC hearings was the Industry Superannuation Network, represented by its CEO David Whitely. Mr Whitely countered the AFA and AMP submissions, stating: “There are a number of factors that would indicate a growth in employment to the financial services industry and particularly financial planning.” Mr Whitely said that the figures being used to estimate job losses were no longer up to date, and that Rice Warner had reviewed its original research (used by the Government to introduce the reforms to Parliament).
In the new report, Rice Warner estimates that the number of ‘full advice’ advisers will decrease from 17,400 in 2012 to 14,260 in 2026. However, advisers employed to deliver ‘scaled advice’ are expected to grow, with the report predicting there will be an additional 2,100 employees in this category by 2026 (up from 300 today).
In a letter introducing the new research to the PJC, Mr Whitely said the report highlighted very positive impacts from the reforms, including a near doubling of the amount of advice provided by 2026.
“After taking into account the policy changes and the increases in scaled advice employment since publication of the first report in 2010, the latest report finds total employment in the sector will be broadly stable, with the most profound change being the type of advice advisers provide, in response to consumer demand. There will be increased use of IT and the internet to provide cost effective advice to Australians,” Mr Whitely said.
“The updated report also notes that total employment may increase depending on the success of commercial strategies developed in response to the reforms. For example the new cohort of Australians accessing scaled advice may be more receptive to upgrading to more costly full advice by being familiar with the benefits of advice,” he added.
What cloud do Rice Warner live on. predicting out to 2026. That is as bad as a planner Predicting a telephone number retirement figure over the same period. I wonder if they have any concern for the families of those already employed in the advise business who will be either retrenched or sacked as their current employers go under due to FOFA.
Of course the government lackey’s are going to play things down – unfortunatly the proof will be in the eating but by that time many excellent caring professionals will have gone.
It doesn’t matter whether tens of thousands or a few thousand jobs are lost, (although I would tend to believe the AFA and AMP over Rice Warner whose views I believe are tainted by ISN input)no jobs should be lost because of implementing reforms that are not required.
As a result of the increased costs to both adviser firms and clients, Advisers will resort to providing ‘scaled advice’ or ‘no advice’. This means that many people will miss out on the advice that they should be receiving(won’t pay for it)and the Government and Regulators have once again, shot themselves in the foot!!!!
Financial Planning is moving toward a fee for service profession. Just like Solicitors and Accoutants, the more affluent the client, the more likely they will be to pay fees for advice. The rest of the population will get scaled advice at a low fee. You know the old saying – “you only get what you pay for”
It would make more sense to ask people how much they are prepared to pay for Insurance advise and then calculate the cost to provide comprehensive advise and all the administration work that goes with it.
We have done this exercise and 100% of people have said the amount of money they are prepared to pay for advise and all the ancillary work to get to the completion of the Insurance coverage, does not even cover a fraction of the cost, let alone enough to make a profit.
Investment/lending advise is different and people are happy to pay for advise in these areas.
To make assumptions that clients will pay for Insurance advise as part of a total planning strategy,is wrong.
All that you are doing is hiding the real cost of providing advise and forcing up fee’s which will mean even less people will be able to get access to professional Insurance advise.
The model will be scaled down Insurance advise which does not do what it is meant to do and that is to look at a persons assets, liabilities,Income and expenditures,then formulate appropriate Insurance to cover the clients present and future needs.
Julia says it is all about JOBS JOBS JOBS unless you work in the Financial Services Industry in which case it is all about JOB LOSSES, JOB LOSSES, JOB LOSSES. The day when this unpopular self serving government and David Whitely will no longer be able to mess us around is thankfully getting closer.
Most of the people who throw in their three pence worth of comments are either illinformed or do not want the facts to interfere with their desired outcomes.
We are a small firm with 5 fulltime employees and two part time. We have already had to reduce by one part time and we shall reduce by one more full time in the next three months and another full time by end of 2012.
I do not know what those figures represent accross the board but if repeated on a pro rata they must amount in to the tens of thousands.
The difference is that we need clients approval for evety dollar of income we take in. David Whitely on the other hand does not.
You can talk about the projections as far out as 2026 if you like. Even if finally true that will not stop the immediate effects which is what has been highlighted.
The AFAas represented advisers accurately for nearly 60 years and AMP has been around for more than 150. One ought to listen to the experience of those organisations.
Advisers and staff who have to find oither jobs will not find them in banks nor in the resources areas.
Nothing in this is new. Governments hear what they want to hear. They do not want to hear this.
Comments are closed.