MenuSarah Abood, CEO of the Financial Advice Association Australia (FAAA), says Minister Mulino’s National Press Club address next week must put Australians’ access to affordable, trustworthy financial advice at the centre of the Government’s reform agenda.
With Australians facing rising living costs, a more complex tax system, and an increasingly difficult financial landscape to navigate, the FAAA says the Government must act on four issues that directly affect consumers’ ability to access trusted professional financial advice:
- Making the Compensation Scheme of Last Resort (CSLR) sustainable, so the costs do not continue to drive up the price of advice.
- Preventing future harm, particularly from predatory lead generation practices that can steer consumers towards inappropriate financial products.
- Enabling consumer choice and lower costs through the implementation of sensible Delivering Better Financial Outcomes (DBFO) reforms.
- Supporting the growth of the financial advice profession across all business models, ensuring consumers have choice about how they access advice.
Advice costs rising fast
“Financial advice has never been more important, but too many Australians simply cannot afford it,” Abood says.
“The median price of financial advice has shot up by 65% over the past five years, and is currently around $4,700. Every dollar added to the cost of providing advice makes it harder for consumers to access that advice.”
FAAA research shows that nine in ten advisers expect the CSLR levy to further increase the cost of advice, with the average practice facing a bill running into thousands of dollars per adviser, Abood says.
“Innocent financial advisers are currently paying these bills, and in many cases are forced to pass the costs on through higher advice fees. Consumers should not have to pay even more for professional financial advice because of failures by completely unrelated firms and in other parts of the financial services system.
“Wrongdoers should be pursued for compensation payments before innocent parties have to foot the bill, and AFCA’s rules and powers should be strengthened so complaints can be made against all parties that contributed to consumer detriment. Without these changes, consumers receive less compensation and protection, while the costs of the CSLR and financial advice continue to rise.”
Consumers’ superannuation needs protection from aggressive sales tactics
The FAAA says the collapse of the Shield and First Guardian products show how devastating high-pressure sales tactics can be when unregulated lead generators funnel consumers, often via unsolicited calls, into products promising high returns.
“Around 12,000 Australians lost, in some cases, all their retirement savings after being targeted by sales processes that looked and felt like advice,” Abood says.
“Consumers need stronger protections against predatory lead generation, while still being able to find the right adviser for them.”
Less paperwork means more affordable advice
The FAAA says the DBFO reforms must deliver the simpler, more efficient advice system that was promised.
“Consumers should not be paying for unnecessary paperwork and regulatory complexity,” Abood says.
Growing the profession and supporting choice
The FAAA says the number of financial advisers has halved since 2019, while the demand for advice is skyrocketing as more Australians reach retirement age.
“We support the Government’s proposed education reforms and urge Government to bring these forward as soon as possible. Growing supply and ensuring there are a diverse range of advice practices will help lower costs for consumers, while also ensuring they have genuine choice in how and from whom the service is accessed.”
Abood says the Minister’s address is an opportunity to put consumers back at the heart of financial advice reform and prevent future harm.
“Australians need a financial advice system that is affordable, accessible and trustworthy,” Abood says.
“We are calling on the Minister to use next week’s address to commit to a sustainable CSLR, prevent future harm, shut down predatory lead generation practices, deliver sensible DBFO reforms and help grow the financial advice profession – reforms that will directly help more Australians access the quality financial advice they need.”
