AIOFP urges action as 2.5m clients face abandonment

The AIOFP’s paper, titled 6 Critical Issues for Advisers and Consumers, details a number of policy proposals aimed at reducing costs for advisers, including the elimination of the TPB as an adviser regulatory body and the establishment of an adviser panel to consult with ASIC on future regulatory change.

In addition, the paper recommended the new code monitoring body be established under FASEA to save further regulatory duplication for advisers, while the authority should be brought under parliamentary scrutiny, as recommended recently by the House economics committee.

The report, compiled by AIOFP executive director Peter Johnston as well as a number of the association’s adviser and licensee members, estimates that around 10,000 advisers could leave the industry by the time the FASEA education standards framework is fully implemented at the end of 2025.

“[These] 10,000 advisers have 250 clients on average with 2.5 staff, mostly women. The staff include one full-time manager, full-time paraplanner and one part-time. The average turnover in the industry is $650,000 including small to very large businesses,” the paper states.

Based on these assumptions, the paper suggested 2.5 million clients could be left without an adviser in the next five years if rising regulatory costs in the industry are not addressed.

In addition, better management of the FASEA standards process emerged as a major theme in the report. 

As well as closer government scrutiny of the authority, the association urged FASEA to provide better disclosure on areas for improvement for advisers who had failed the industry exam, and suggested a separate educational category needed to be established for risk advisers. 

“In situations where risk advisers are restricted in terms of their ASIC licence, via their licensee, to only provide advice on risk insurance products, it does not make sense that these risk advisers should have to pass exams covering areas irrelevant to risk advice,” the paper stated.

“This issue is further compounded by the fact that risk advisers have to requalify via a bachelor degree consisting of up to eight university level subjects, many of which are unrelated to risk advice. Of the 76 topics currently offered over the eight modules, approximately half have no bearing on the skills required in order to provide specialist risk advice.

“Studying and passing exams in these courses is not only wasteful in terms of time, cost and resources, but is, more importantly, a potentially unfair way of forcing competent risk advisers to exit the profession.” 

The paper will be debated with representatives of both sides of Parliament later this week in a virtual members event hosted by the association.