'Lots to do': How to make advice more affordable

While the Delivering Better Financial Outcomes (DBFO) reforms have been heralded as a significant step towards reducing the cost of advice to make it more affordable for Australians, the first tranche seems to have barely made a dent and the second is not yet in sight.

On the latest episode of the ifa Show, financial adviser and owner of On Your Own Two Feet Helen Baker argued that, while it all helps, she doesn’t believe these reforms will be enough to make a significant difference.

“I don't think you're going to dial down the cost of advice by thousands and thousands of dollars that people are then going to be able to afford the advice,” Baker said.

“There's just a whole lot of compliance and regulation that continues. You know, the licence fees as the base costs are so high for everybody, even the professional development, which, look, everybody wants to be at the top of their game, I get that. But all the time that we have to do all these hours and hours of professional development means that's less hours in front of clients.”

While she believes continuing professional development (CPD) is important for advisers, Baker explained that the current structure and requirements are “quite rigid”, leading advisers to spend an excessive amount of time meeting said requirements.

“It used to be about 20 when I started and now it's 40, so it's double. I just wonder whether things like that could also help to trim back and open up the time that advisers are available,” she said.

“Obviously we don't want to be doing it to a point where we become incompetent, but I think advisers kind of know where they need to get their professional development hours up and learn.

“I know one year I ended up doing like 70 hours of professional development because it wasn't under that particular category or it crossed over, only part of it was on that category. So, you're doing bundles and bundles of hours on certain things that are not there.”

Another potential solution to the cost issue, according to Baker, is making advice tax deductible. While this is currently possible in very limited circumstances, many have been calling for this to be expanded.

“I don't know why it's not tax deductible. That's one that just is a little bit mind blowing, because anything else, if you went to a lawyer about your situation or the accountant, you know, all of that is tax deductible. So, I don't understand why we're making it so difficult for financial advice,” she said.

Unfortunately, if more people were able to access financial advice, it would only further exacerbate the issue of so few practising advisers.

“Fundamentally, there is way more people that need advice than there are advisers and that's only going to be a bigger problem,” Baker said.

She added: “There's lots to do.”

To hear more from Baker, click here.