The average cost of advice will almost halve over the next 15 years, but planner employment should remain stable, according to a new report by Rice Warner.
The Industry Super Network (ISN), who commissioned the report, said the results confirmed that the Future of Financial Advice (FoFA) reforms were not only good for Australia’s retirement savings, but good for the advice industry as well.
The report estimated that the average cost of advice would reduce from $2,046 (in 2012, before the reforms were enacted) to just $1,163 by 2026/27. It also found that the number of financial planners employed in Australia would remain stable over the long term.
‘While increased transparency may result in a perception of higher cost for complex advice, fee for service charging is in most instances, less costly for the client over the medium to long term than trail commissions or asset based fees. While there is a risk of reduced demand for comprehensive advice, this report finds demand for comprehensive advice will be broadly stable after the regulatory change,’ Rice Warner said in its report.
The reforms to financial advice will set the industry up for a long period of stability
‘Our projections show that the demand for full (holistic) advice is likely to be broadly stable whilst the demand for scaled advice will increase substantially, to the point where one in eleven people across the overall population or one in seven employed people will obtain regulated financial advice each year.’
According to the ISN, the cost-benefit analysis included in the report shows that the benefits to consumers from the FoFA reforms outweigh the implementation costs up to three times over. It added that there was the potential for growth in planner numbers, but that this was ‘… dependent on how quickly the sector adapts to the shift in demand for scaled financial advice’.
“The report finds that within a decade and a half there will be a doubling of financial advice, primarily due to the expected increase in demand for individual pieces of advice,” ISN CEO, David Whiteley, said.
“The reforms to financial advice will set the industry up for a long period of stability, and the research confirms that consumers can have renewed confidence in the system.
“These findings show that the laws are a win-win for both planners and consumers,” he concluded.
Not sure how these figures are derived, but I suspect the that someone has used the / rather than the * in their spread sheet.
If any one thinks that more administrative requirements will result in lower costs they truly must be living on another planet, um – sorry just realised the report was paid for by ISN.
Maybe we should ask to get Japans results into the whale industry – research?
So he thinks the fees will drop half over the next 15 years when the costs of running a business do go up because of things like wages, rent, SG to 12% and Professional indemnity etc.
Does he expect his income to halve as well over the next 15 years.
I don’t think so and as Darryl Kerrigan says “He’s dreaming”.
Maybe he should take a 50% pay cut now and see how he likes it.
Im sorry, but this article is ridiculous! Since July 1 we havent been able to roll out any good advice to clients. We are purely doing red tape administration, which adds no value at all given what we are disclosing, has already been disclosed 2-3 times per annum in any case.
A great example of very,very, very poorly drafted and rushed through legislation!!
Not happy!!
They must use the figures companies are charging now. Fee for service charging is low now because Advisers are getting Trail Commissions and Asset Based Fees.
With the loss of Trail Commissions and Asset Based Fees advisers will just charge a higher fee for service to make up the short fall.
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