How can we address the problem of advice affordability?

Getting the cost of advice down to a reasonable level is one of the sector’s key challenges at the moment. It’s commonly accepted that most clients cannot be profitably serviced for less than $3,000 in annual fees, and consumer research shows that most do not see the value in advice delivered at that kind of price point.

With more clients set to be orphaned as a result of the adviser exodus, and further compliance changes this year as a result of the royal commission pushing costs up higher, this problem is only set to get worse. More consumers will go without professional advice at a time when housing affordability is at its worst in living memory and the country is recovering from the economic shock of a once-in-a-century global pandemic.

That’s why it’s essential the industry come together constructively to work towards a consensus of how we solve advice affordability. The government and regulator have shown willingness to also collaborate on this problem, with ASIC releasing the initial findings of its industry consultation into the barriers to affordable advice on Friday.

The data released focused mainly on the provision of scaled advice, which has also emerged as a top theme in our own adviser research. While advisers expressed a willingness to provide scaled advice, they were concerned it would breach the FASEA Code of Ethics, restricted by their licensees’ policy towards scaled advice, or believed there was no cost saving in doing so as they were bound by the same best interests duty restrictions.

ifa hopes to continue this conversation later this year with our brand new event, the ifa Future Forum. To be held on 8 October at the Four Seasons in Sydney, the Forum will bring together leaders across the advice sector to workshop solutions to solve the problem of accessibility and affordability in advice. It will be practitioner-led, based around issues that our readers have pointed to as being key roadblocks to providing quality, reasonably priced services to clients.

Some of the key themes we have uncovered so far include the disconnect between advice regulation and licensee policies, the lack of connectivity between industry technology providers, regulatory duplication, increasing the supply of advisers, and the development of a better model of advice for lower-balance clients.

In the lead-up to the event, we’ll be further workshopping these themes through feature articles on site and the ifa Show podcast. With an election year approaching as well as a holistic review of the advice sector from the government in 2022, it’s important that the industry get clear on what initiatives could help solve the problems it now faces, in order to take advantage of the opportunity to shape the future of advice.

You can register your interest for the Future Forum here, and in the meantime please keep your feedback coming through the comments below and feel free to get in touch at [email protected] if you have any ideas or feedback around this topic that you think we need to hear about.