Proposed framework could cut cost of advice by almost 40%

In a new white paper, the peak body has outlined a framework that could cut costs by almost $2,000, which FSC CEO Sally Loane has said the government must consider now.

The paper recommends raising the threshold under which clients are identified as retail clients with those with assets of less than $5 million, abolishing the safe harbour steps for complying with the best interests duty and removing “complex” SoAs in favour of a letter of advice.

The FSC has also called on the industry to move to sustainable self-regulation by 2030.

“The financial advice industry has reached an important milestone: it has become a profession. It is time the government modernised the current complex and costly regulatory framework to recognise and respect the professional judgement of advisers,” Ms Loane said.

“Current regulations prescribe compliance obligations at every step of the advice process. They are an unprecedented driver of cost for financial advisers and consumers, and are past their use-by date.”

KPMG’s analysis of the FSC’s recommendations found that the cost of providing financial advice would be reduced from $5,334 to $3,466, would save advisers up to 32 per cent of time when dealing with clients and allow them to provide advice to an additional 44 new clients each year.

KPMG also said the time required to complete the advice process would be reduced from 23.9 hours to under 16.8 hours.

“Long term, the FSC’s reforms could generate cost savings for the advice industry of $91 billion over 20 years,” Ms Loane said.

“The FSC has welcomed the strong support and constructive feedback we received from the advice industry, consumer advocates and FSC members.

“Having led this debate with our green paper in April, we now want to see the past few years of significant reform and professionalisation of the sector rewarded with a regulatory framework that trusts advisers’ professional judgement.”

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.