How the Government Is Ruining Financial Advice for Political Gain
How the Government Is Ruining Financial Advice for Political Gain
My fellow financial adviser, podcast co-host, and great mate, Lionel O’Mally, aptly said, “You are too afraid of saying anything rather than joining together to help fight for our rights. No wonder we keep getting screwed over by politicians and regulation.”
Strong words from a passionate financial planner who’s as fed up as I am with the relentless regulatory onslaught. For 20 years, I’ve watched as politicians pile on levies and regulations, pushing up the cost of advice and making it harder for Australians to access the guidance they need.
The Unseen Agendas
It's clear to me that politicians have little interest in listening to financial planners or the Australians they are supporting. Petitions and letters to MPs? They achieve nothing. Real influence in our industry comes from three places: industry super funds, the big four banks, and journalists.
1. Industry Super Funds
Recent policy changes seem designed to repay industry super funds. Is this a form of conflicted remuneration for supporting Labor? Or just incompetence? Politicians claim to address the cost of living crisis, but their actions leave a lot to be desired.
Many would argue that they were the main contributor to the cost of living crisis.
Politicians answer to the cost of living crisis is to make financial advice more expensive and less accessible due to excessive red tape.
Senator Stephen Jones and his allies at industry super funds have found their mark.
They argue that:
· advice is too costly (as the result of politicians and regulators),
· dwindling adviser numbers (due namely to red tape), and
· the need for industry super funds to fill the gap.
But these "qualified advisers" from super funds are not qualified to provide personal financial advice. They can charge fees from super funds, regardless of the advice’s quality or necessity, and limit advice to their own products even if better options exist.
This vertical integration is a recipe for disaster, as we've seen with big banks and Dixon Advisory. So why is Stephen Jones pushing for unqualified advisers to provide limited, responsibility-free advice?
Why is the regulator and Senator Stephen Jones pushing the DBFO bill, which forces trustees to seek evidence before releasing advice fees, adding $440 to $880 per piece of advice?
These measures don't protect Australians; they protect industry super funds and their political allies. No wonder so many advisers are fed up and quitting.
2. The Big Four Banks
The big banks' vertically integrated advice model led to the current regulatory mess. They lobbied for changes that reduced competition and eventually collapsed under their own weight, paying billions in remediation and exiting the advice market.
Since their exit, small family financial planning businesses have been left to bear the burden of increased regulation and levies. Unlike the big banks, they can't absorb these costs, which get passed on to clients seeking advice. The day the big banks bowed out was the day advice became unaffordable.
3. Journalists
The media has played a significant role in tarnishing the financial advice industry. Horror stories about poor advice have pressured politicians to clamp down, even as most advisers strive to do right by their clients.
Advisers are terrible at publicizing their successes. Good news doesn’t sell.
Consultation
Senator Stephen Jones has implemented a block and ban policy on those who challenge his views or want to share their concerns on social media. It’s disheartening to see a politician responsible for financial advice reform refusing to engage with advisers, favouring industry super funds instead.
The Financial Burden on Advisers
Recent projections indicate that the CSLR levy will cost $5,709 per adviser, compounded by the ASIC levy of $2,818. This $8,500 burden is a significant strain, especially for small business owners prioritizing their clients' interests.
Dixon Advisory's parent company, Evans and Partners, earned over $174 million last year, yet individual advisers and small family businesses bear the cost of their failures. The current regulatory framework is unjust and unsustainable.
But is that what the government and industry super funds are seeking?
Legislative Changes and Their Impact
The Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill introduces potential restrictions on advice fee payments from superannuation. This legislation, while claiming to reduce red tape, will likely impede access to quality advice and increase costs.
The amendments require super funds to rigorously assess advice payments, duplicating AFSL responsibilities and adding costs for all Australians. The financial advice profession has called for changes to prevent increased regulatory burdens, but their concerns have been ignored.
This seems a similar theme from Senator Stephen Jones and the Labor Government.
A Call to Action
Advisers across the country are uniting against the government's mishandling of legislative and regulatory changes. Imposing financial burdens on advisers, especially due to failures by large corporations, is counterproductive.
Parliament must urgently address the threats posed by the CSLR levy and the Treasury Laws Amendment Bill to ensure affordable access to financial advice. The financial services and advice industry is vital for the wellbeing of Australians, especially in times of economic volatility.
A robust regulatory framework is necessary for consumer protection, but it must also keep advice accessible and affordable. We must avoid pricing advice out of reach for everyday Australians, including small business owners and self-funded retirees who save the government millions in pensions.
The complexity and financial implications of the current legislative framework pose significant challenges. Compliance costs are projected to be around $700 million for implementation and $350 million annually, threatening unemployment and creating an uneven playing field.
To address these concerns, we need legislative amendments to mitigate the financial burden on advisers and ensure the continued provision of accessible and affordable advice. Parliament must act decisively to uphold the integrity and sustainability of the financial advice industry, benefiting millions of Australians who rely on these crucial services.
What can you do?
Nothing.
As Senator Stephen Jones refuses to listen to Australians seeking advice, financial planners, or industry bodies, be prepared to pay more for financial advice. Or alternatively, seek advice from your industry super fund, who will tell you how great their super fund is, whilst not considering alternatives. Furthermore, they may not consider your entire financial situation and needs, potentially not looking after your best interests.
Unfortunately, we will be increasing our financial planning fees as of 1 July 2024 to support in meeting all these additional costs Stephen Jones is applying to our small family business.
We would post this on social media and tag Senator Stephen Jones - but he has blocked and banned us.