Analysts at Citi said there was a risk that Commissioner Hayne’s recommendations “could result in a shrinking of the overall advice market”.
The analysts, lead by Siraj Ahmed, said the price of advice could increase due to higher compliance and legal costs, which could result in advice services being out of reach for some clients, particularly those with lower balances.
Consumer body CHOICE’s director of campaigns and communications Erin Turner said while the price of financial advice was important, being able to trust the advice was more important.
“The price of advice does matter, but no one wants to pay for advice that’s conflicted or harmful,” she said.
The cost of regulation
Certified financial planner Patrick Canion said the cost of regulation in the financial advice industry had increased dramatically over the last decade.
“The cost of regulation has increased exponentially, but the market isn’t prepared to pay for it,” said Mr Canion.
However, he said the new registration body recommended by Commissioner Hayne was essential and he welcomed the change.
“It was the missing link in my view to ensuring that financial advisers were accountable to the profession for their ethical behaviour,” he said.
The centralised disciplinary body would require holders of an Australian Financial Services Licence to report “serious compliance concerns” to the body, in addition to the recommendation that these concerns are reported to ASIC on a quarterly basis.
Business as usual for this adviser
Knight Financial Advisors managing director Jason Featherby said he didn’t expect the recommendations to materially change his business in any way.
He said his business already performed annual reviews of fees, stated what fees the client was paying and did fee disclosure statements and so wasn’t anticipating his administration costs to rise.
“If you’re engaged with your clients, I don’t think there’s any change,” said Mr Featherby.
Mr Canion was concerned about the recommendation in the report that ongoing fee arrangements would be annually reviewed.
“The risk of having annual, renewable, opt in advice fees is that it does not reflect how people behave with their money,” he said. He did not think a 12-month review timeline was applicable in every case.
“I’m not against the intent of what they’re trying to do, I’m just against the form of it,” said Mr Canion.
Mr Featherby said any measures that increased confidence in the financial services industry were positive, given the industry had retained “a bad reputation from sins of the past”.
“I think the more regulation we have, the more confidence that people have in our system, the better it will be and the more likely clients are to engage financial planners in the future,” he said.
Mr Featherby said his only disappointment with the royal commission was he felt “the bigger institutions have been left alone”, which meant “the door is open for them to revert back to what they were doing last year or the year before”.