As Australians head to the polls this month, one of the key questions advisers need to ask is not just which side of politics will deliver good outcomes for the profession, but also which will deliver for clients, says Synchron’s Don Trapnell.
Trapnell says the industry has had years of financial services reform, ongoing reviews and inquiries into financial advice, and what he refers to as a never-ending series of complicated changes to advice regulation and legislation:
“This has been the legacy of both Labor and Coalition federal governments – but what we have today as a result is potentially hundreds of thousands of people missing out on advice because there are not enough advisers to go round or because advice is too expensive, or both. That’s a huge concern.”
Trapnell says there are some fixes that an incoming Government could introduce to turn things around, perhaps even quite quickly, and when going to the polls, advisers could consider how likely, or otherwise, the Liberal National Coalition (the Coalition) or the Australian Labor Party (ALP) might be to implement them.
First – Commissions
“First of all, an incoming Government could immediately and formally recognise that commissions are a legitimate and affordable form of remuneration for life insurance advice and commit to leaving well enough alone,” he says.
“We have heard encouraging words to that effect from both sides of politics – including Liberal MP Bert van Manen, and, most recently, Labor’s Stephen Jones. However, both sides say they’ll wait for the Quality of Advice Review and take it from there. That’s not commitment.”
Trapnell also says the Quality of Advice Review follows on from the Life Insurance Framework (LIF) and that Synchron believes LIF was predicated on a lie.
“The lie was that a culture of churn existed amongst advisers when there was very little evidence of it. One side of politics or the other, preferably both, should now publicly support the fact that commissions will help consumers afford life insurance advice.”
Separate Risk Advice from Financial Advice
Trapnell says another progressive step would be to separate risk advice from financial planning advice.
“At the risk of sounding like a broken record… risk advice is specialist advice centred around protecting wealth with life insurance, while financial planning is a broader approach.”
He says that as specialists, risk advisers should therefore not be subject to the same broad education requirements as financial planners. “After all, mortgage brokers are permitted to specialise in mortgage advice and are not compelled to study financial planning,” he says.
…which political party will take the blinkers off and recognise this?…
“Which political party will take the blinkers off and recognise this? If they did, many more advisers could stay on in the profession, meaning many more consumers could access affordable life insurance advice.”
Trapnell also notes the current Government’s election promise to continue helping small businesses to create jobs, by supporting those that are investing in skills, and asked if this support will be extended to those financial advice businesses that take on new graduates and support them in their Professional Year, “…so that we can rebuild a workforce to serve the financial advice needs of Australians, a workforce that successive Government ‘reforms’ have decimated. If not, why not?”
Trapnell has similar questions in relation to election promises from the ALP, including its commitment to ‘Drive a genuine collaboration with small businesses and government to reduce the time small businesses spend doing taxes, cut paperwork and target support’.
He says if regulation wasn’t so complex, advice could be delivered much more efficiently, driving down costs and therefore making it more affordable for more consumers.
Trapnell believes these are just some of the questions advisers could consider when going to the polls. “It’s not just about the future of the profession, it’s also about the financial future of Australians.”
Next Parliament Must Provide Certainty for Financial Advisers
Meanwhile, the FPA says that the next Australian Parliament must provide certainty to the financial planning profession on issues such as:
- ASIC’s industry funding model and planner education standards
- Prioritise the creation of a Compensation Scheme of Last Resort (CSLR)
- Further regulation of ‘finfluencers’,
- Provide tax deductions for the provision of financial advice
The association has released its 2022 Federal Election Platform, outlining what it would like to see addressed by the 47th Australian Parliament and chief executive Sarah Abood says it looks forward to working with parties and stakeholders “…on policies and initiatives that contribute to affordable financial advice for all Australians and a sustainable financial planning profession for the future.”
The FPA cited the creation of a CSLR as a high priority, saying its design and implementation should ensure that consumers are covered for the full range of matters considered by AFCA “…including managed investment schemes, and that the Government bears the costs of the establishment and any legacy claims relating to the scheme.”
It adds that the administration costs of a CSLR should be closely monitored “…to ensure that cost recovery from industry primarily compensates consumers rather than covering bureaucracy and administration.”
Left in Limbo
Regarding reforms to education requirements for financial planners, Abood says the profession has been left in limbo.
“After a flurry of proposals and announcements over the Christmas/New Year break, financial planners who had not yet completed their education under the current requirements have been left uncertain as to what to do.”
…we’re calling for both major parties to consult …and clarify the detail as to how any changes to current education requirements would be finalised…
She says while the association recommends continuing these studies under the precautionary principle, “…it’s a significant commitment for many. We’re calling for both major parties to consult with the profession and clarify the detail as to how any changes to current education requirements would be finalised and implemented.”
The FPA is also calling for “sensible measures” to improve the affordability and accessibility of financial advice, “…such as reducing regulatory complexity and duplication as well as providing Australians the ability to claim a tax deduction for the provision of financial advice, regardless of the stage in the advice process.”
In relation to Treasury’s review of ASIC’s industry funding model, the association says it should report its findings before the freeze on ASIC levies charged for personal advice to retail clients expires.
In addition, the FPA has called on regulators to take more action on ‘finfluencers’ to ensure that Australians only act on the advice of licensed, qualified and professional financial planners.
Abood says the FPA’s election platform is confined to matters on which it believes require executive and legislative action during the next Parliament.
Don has explained the situation succinctly and if all Australia wants to see a better future for their own Insurance benefits and premiums that will stabilise to provide certainty, then his summation needs to be acted upon.
The FPA needs to realise that they have never had enough experience to understand the full intricacies of risk advice and they need to talk to and get advice from true experts who live and breathe risk advice, then they may be in a position to talk policy direction.
To date, they have failed on this and the resulting decline in Advisers and the sustainability of the Life Insurance Industry has clearly been seen, from misguided policy objectives and this must change.
I am happy to talk this through with the FPA and I am sure that if they listen and act upon the correct strategy that can then be coordinated and explained in plain English to Ministers, then we can bring this vitally important Industry back onto the right path, as the current path is a maze with no clear direction and no end in sight.
There aren’t enough votes in our Industry to stop the inevitable. Both sides have let us down as well as the FPA and the AFA
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