Australia’s growing need for advice highlighting harmful regulations

Research conducted for the Financial Services Council (FSC) by NMG, published earlier this month, revealed that the number of Australians with complex financial needs is expected to increase 70 per cent in the next 25 years, hitting 7.2 million, up from 4.3 million in 2024.

Appearing on Ausbiz last week, FSC chief executive Blake Briggs discussed the research findings, explaining that some of the legislation and regulations governing the advice profession are too rigid, putting onerous obligations on advisers that ultimately drive up the cost of advice.

“A lot of the regulatory developments are really catering to simple default arrangements, and part of that’s driven because by being simple, they’re easy for the regulators and bureaucrats to understand,” Briggs said.

“But it also means that when there’s legislation implemented, or regulatory change from ASIC or APRA, they’re really done on a one-size-fits-all basis, and that’s causing a lot of unnecessary cost and friction in the system, a cost that’s inherently passed on to consumers.

“What we’re pushing for at the FSC is a better understanding that Australians with more complex needs need a regulatory framework that suits their arrangements.”

Briggs explained that, due to the complexity of Australia’s retirement system, financial advisers’ services are in high demand, with many needing help to ensure they and their finances are adequately prepared for retirement.

“We’ve got Australians who, as they approach retirement, many will only have a couple hundred thousand in superannuation, but that’s enough that they might lose part of their eligibility for the age pension, or they might also have a family home that’s grown far more than they ever expected,” he said.

“Trying to make decisions, fairly complex financial decisions, [that] take into account those things is beyond the capacity of the average person, but they want to be supported and involved in that process.

“The regulatory framework just needs to accept that these people want to have control as they approach retirement, to be able to seek support from an adviser or their superannuation fund to help them with those decisions, but not have unnecessary regulation or cost built into that process.”

Briggs said that the vast size of Australia’s retirement system can be a “mixed blessing”.

He explained that while Australia is a “world leader” in regulation of retirement and incomes, “not all of it is well considered”, imposing unnecessary costs on advice.

Speaking on the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms, Briggs said that, if done right, it would help solve one of the biggest challenges facing the advice profession today.

“One of the big challenges that this government is looking to solve in this term of Parliament is, how do we set the regulatory framework to bring more advisers into the market?” he said.

“The assistant treasurer, Stephen Jones, is soon to hand down a major package of reforms, which, if he threads the needle, will get the balance right to not just deliver more Australians affordable financial advice, but also create a pipeline for new financial advisers to enter the market to meet that growing need.”

In a statement following the passing of the first tranche of the DBFO reforms in early July, Financial Services Minister Stephen Jones said the second tranche would “be developed over the second half of the year”.

“This includes the government’s commitment to reform statements of advice, modernise the best interests duty and remove the safe harbour steps, and increase the provision of advice by financial institutions,” Jones said at the time.

“The government will ensure these reforms provide access to safe, affordable and quality financial advice to deliver better outcomes for the millions of Australians seeking financial advice and information.”

Despite the reassurance that the next round of reforms are on the books for 2024, many within the profession have raised concerns about the relative complexity of the second tranche in relation to the first, and potential delays due to the Australian federal election set for 2025.