IPA

Making financial advice affordable

VICKI STYLIANOU is advocacy and policy group executive with the Institute of Public Accountants. Finally, it has been acknowledged Australian consumers are unable to access the financial advice they need at an affordable price. The price gap is significant, $2000 to $3000 for comprehensive personal advice and around $1000 for limited personal advice, between what consumers are prepared to pay and what it costs advisers to produce the advice. Supply is dwindling, with many advisers having either left the industry or intending to do so.

The Australian Securities and Investments Commission’s (ASIC) consultation paper, “CP 332 Promoting access to affordable advice for consumers”, seeks to tackle this issue. The Institute of Public Accountants (IPA) lodged a submission partly based on survey results from members who currently or previously worked in or have experience in the financial advice space.

The objective was to seek information from industry participants on the issues and impediments that exist around them delivering affordable personal advice, and are within ASIC’s power to address. Previous research undertaken by the regulator and various other stakeholders found consumers want better access to good-quality, limited and affordable advice, but that many advisers and licensees find it challenging to provide this type of advice at an affordable price. So we know demand exists, but the supply side needs to be addressed.

Exiting financial advice sector Given the difficulties in providing advice at a profitable or even viable price, it is not unexpected many advisers have chosen to exit the space. This also applies to IPA members and it is extremely concerning to see the rate of decline in adviser numbers. It is also ironic given qualified accountants are well placed as trusted advisers to provide advice to clients and to assist in meeting the growing demand for affordable advice. In this regard, the IPA continues to advocate a preferred model for the provision of financial advice that would satisfy the demand and supply sides.

According to our own internal data, about one-quarter of IPA members who hold professional practice certificates also hold full or limited Australian financial services licences or are authorised representatives of licensees. In line with declining adviser numbers, our latest data indicates the income derived from financial advice overall is diminishing across all licence types and also for authorised representatives.

The survey results for CP 332 indicate the overwhelming response to the question of impediments to accessing affordable advice for consumers is that compliance is the main driver of cost in providing advice, and that meeting these compliance costs is making it unprofitable to provide advice to a cohort of consumers who will not pay what this advice costs. A significant rebalance is needed if the unmet advice needs of consumers is to be satisfied.

However, this is a challenge that needs a holistic solution and which cannot be solved by ASIC alone. To this end, we acknowledge CP 332 states ASIC will pass on feedback and comments on suggestions for law reform to the government. The IPA believes to seriously tackle the affordability issue, compliance requirements will need to be changed in terms of legislation, regulation, interpretation and implementation. We appreciate ASIC’s role is in interpreting, implementing and enforcing the legislation and regulation, which are developed and decided by Treasury and the government. However, fees, such as those imposed by the ASIC industry funding model, are within the control of the regulator and are part of the increasing cost of doing business suffered by many IPA members and other advisers. The IPA has joined with the other professional accounting and financial planning associations to advocate for review and reform of the ASIC industry funding levy. Our joint statement called them “shameful”.

In the meantime, we are hopeful consultation on CP 332 will result in meaningful change for the sake of all consumers.

See the full IPA submission to ASIC on affordable advice to consumers.