It’s probably an understatement to say it has been a tumultuous year for the financial advice industry. It this, our last newsletter for the year, we re-visit the big stories that resonated with advisers through our communications since January. Perhaps not surprisingly, our piece on the Royal Commissions final report being released was the most clicked on article of the year. Our ongoing commentary of the issues effecting advisers such as grandfathered commissions and chronicling the ongoing FASEA code of conduct story was also highly viewed – as were our regular data insights around licensee and adviser movements. See our top 6 most viewed stories for the year below.
The Royal Commission's long-awaited final report into misconduct in the Banking, Superannuation and Financial Services Industry was delivered by commissioner Hayne on Monday afternoon. The report is far reaching and covers many aspects of financial services, delivering its recommendations in different sectors, with the section on financial advice running for around 100 pages. In the coming days, we will unpick the report, specifically the areas concerning financial advice, to try to understand the 10 individual recommendations included that relate directly to financial advice. We will add to this analysis from our data archives, to help determine the potential material effect that actioning the recommendations will have on advisers and the implications for their businesses, their clients and the financial advice industry as a whole.
The Australian Financial Complaints Authority (AFCA) has announced how it will assess adviser conduct obligations under the new Financial Adviser Code of Ethics. AFCA will only assess adviser conduct against the Code where a complaint and the conduct has occurred after 1 January 2020. Meanwhile, adviser sentiment towards FASEA seems to have hit rock bottom…
The pending release of the banking Royal Commission’s final report, due out on February 1, has the potential to radically change large parts of the Australian financial services landscape. Advisers will be at the coalface of many of the potential changes, with the commission expected to recommend changes around adviser remuneration that could affect most facets of their revenue. Many advisers may have to amend their client service payment models and equally, the relationship and business models with licensee groups, product providers, and associated service providers all have the potential to be substantially affected.
Of all the recommendations to come out of the Royal Commission’s final report, the one with the most immediate material concern for advisers are the recommendations around changing the ways they are remunerated. Going to the heart of the “poor advice” issue, Hayne has pointed to adviser so-called conflicted remuneration – in particular grandfathered commissions and insurance commissions, recommending they both (eventually) be reduced to zero. This would, in the commissioner’s eyes, help ensure advice clients get the best advice for their individual situation and help thwart the temptation for advisers to use products that give them the most commission.
Are the numbers from our “Q2 Musical Chairs Report” trends, or the result of "one offs" like Westpac’s move out of licensee land and the associated move of many of these advisers to Viridian. We can reveal here that Westpac contributed only around 10% of total ceased adviser numbers for the quarter. Viridian did not even make the top 10 of licensees with most adviser additions for the quarter. The changes and trends are industry wide, rather than the result of one particular occurrence.
The regulatory and compliance burden facing growing licensees is perhaps, the X-factor that should not be frivolously dismissed by anyone concerned with the future of the advice industry. With the big guys exiting advice, there will be a renewed focus by ASIC on smaller licensees. Adviser Ratings analysis shows that while there are over 2,200 licensees operating in Australia, around half of all advisers are authorised by just 48 mid to large sized licensees.
There was a lot to report on for the year, we hope you found our articles at least timely and informative, if not enjoyable! We look forward to bringing you more critical analysis and insights in what shapes as a critical year for advice in 2020.