Asked by Mr Rees about the decline in the number of licensed financial advisers in Australia, the shadow minister said he thought it was a “disaster” and “alarming”, noting that the gap between demand and supply of quality advice was widening.
There were 21,631 registered financial advisers in Australia as at the end of June, according to research house Adviser Ratings, indicating a 21 per cent decline in the workforce year-on-year.
“Long-run regulatory reform” was listed by the researcher as a key catalyst for exits from the industry, which come in the wake of new minimum education and professional standards for advisers and a controversial code of ethics under which some fear their business models could be effectively outlawed.
The decline has also been exacerbated by a federal ban on investment commissions previously grandfathered under the Rudd-Gillard government’s Future of Financial Advice legislation, which forced the industry onto a fee-for-service pay model and introduced a duty to act in clients’ best interests.
Consumer advocacy outfit Choice has estimated that ending the grandfathered remuneration provisions would cost the industry as much as $2 billion in commissions.
‘Not going back’
However, Mr Jones said Labor would not support a proposal to exempt advisers limited to advice on life insurance (as opposed to investments, tax and broader financial topics) from the mandatory examination and standards enforced by the Morrison government.
“The old business model upon which financial advice was built – commission-based and an extension of the sales process – is broken,” he said. “We’re not going back there.”
Mr Jones acknowledged the industry’s criticism of the agency overseeing the education reforms, the Financial Adviser Standards and Ethics Authority, noting it had been through a succession of chief executives and board members since being established in 2017.
But the former labour movement lawyer skirted around the question of intra-fund advice provided by union-linked industry superannuation funds, which the association hosting the event says is akin to the “fees for no service” scandal blasted by the Hayne royal commission.
Intra-fund advice is an increasingly popular mode of financial planning offered by super funds, paid for by the collective membership and legally limited to retirement issues.
Mr Rees also declined to take a position on intra-fund advice, while accepting that some advisers and Finance Sector Union members are calling for the model to be eliminated.
Addressing the same event, Coalition MP and former financial adviser Bert van Manen also pushed back against calls for a separate, less onerous education regime for insurance-only advisers, while committing to aid access to advice for consumers.
“The industry has suffered from an overload of red tape and regulatory change,” Mr van Manen said. “The government is focused on helping this industry move forward. We want to see your businesses succeed.”
Financial Services Minister Jane Hume announced a temporary relaxation of some rules governing financial advice in April so consumers hit hard by the pandemic could get limited advice capped at $300.
The corporate regulator is currently examining a more permanent solution to providing affordable advice to mainstream consumers, which industry figures such as AMP chairman David Murray have warned is becoming untenable.
The coronavirus pandemic has led to an increase in demand for advice “evidenced both empirically through level of inquiries and anecdotally from advisers”, says Adviser Ratings.
