Advice industry dominated by ‘self-interest’ groups: CEO

Speaking to ifa, Connect Financial Service Brokers CEO Paul Tynan said he had made countless suggestions over the past 20 years about how the financial planning industry can be made more affordable, client-centric and transparent.

“However, self-interest groups, lobbyists, lawyers, institutions, and associations have dominated the debate which has led to the current state of overregulation and unaffordable advice for most Australians,” Mr Tynan said.

“Additionally, the industry is not attracting new entrants [now] and existing financial planners are exiting in huge numbers.”

Mr Tynan said two decades of reform have been characterised by the Federal Government listening to the loudest voices of ‘self-interest’ and as result, the sector is now “needlessly complex, expensive, with affordable advice out of the reach of most Australians.”

He added that the sector is overseen by a regulatory framework that is increasingly incapable of dealing with modern industry issues.

“In fact, it has accelerated the exit of advisers from the industry whilst simultaneously dissuading new entrants from considering a career in advice, hindered innovation and uptake of technology, growth and capacity to respond to new opportunities, rapid changes in consumer needs and overseas competition,” Mr Tynan said.

“In order to have a viable and successful future, as a basic principle of business, advice has to be affordable and underpinned by a genuine framework that facilitates transparency, the best interest of the client, and most importantly, scalable.”

To achieve this, Mr Tynan says financial advice must remove power from super funds, lawyers and institutions, and place it in the hands of the consumer.

“By placing the consumer at the centre of the financial services universe, it will ensure the provision of advice is affordable, fit for purpose, reliable, simplified and outcomes-based rather than responding to the prescriptive regulatory framework that is currently in place,” he said.

Mr Tynan believes there should be a new advice framework comprising three categories of advice: Consumer information, which is not specific or product-focused; Proprietary advice, which is product/service-focused; Holistic independent advice, which is not product-focused.

“Whether consumer information, proprietary advice or personal advice, the financial practitioners will help consumers achieve their specific financial goals,” Mr Tynan said.

“While they share similarities, they differ in the types of service they offer and the remuneration rates at which they offer them,” he said.

“Proprietary and personal advice operate on the principals that the adviser has a fiduciary duty to act in the best interest of the client.”