The Financial Services Council (FSC) has released a Rice Warner research report outlining significant changes to the existing financial advice model to enable the delivery of more affordable and assessable advice.
The industry body is looking to use the Rice Warner study as the basis to initiate a policy debate about the future of financial advice in the country.
The research report contains recommendations as to how the existing financial advice model should be amended, some of which the FSC has described as radical.
“Quality financial advice is needed now more than ever as the economic impacts of the coronavirus pandemic are felt by individuals right across the nation. The Rice Warner ‘Future of Advice’ report starts an important policy debate on how we can rebuild a simpler and more affordable advice industry,” FSC chief executive Sally Loane said.
“Rice Warner’s research examines both the need for advice and the value of advice. It shows evident benefits of financial advice to the health and wellbeing of individual consumers, as well broader economic benefits such as reduced long-term expenditure on the age pension.”
Included in Rice Warner’s suggestions are the notion that all advice has to fall into one of two categories – strategic advice and financial product advice – and that new definitions of financial advice should be implemented, being general information and personal advice separated into sub-categories such as simple personal advice, complex personal advice and specialised advice.
The actuarial firm has also made the call for the cost of financial advice to be tax deductible for consumers and for the new system to have a greater focus on simplification, affordability, accessibility, consistency and quality of advice.
In addition, the report has put forward a case to cut the compliance red tape involved with providing financial advice, including reducing the associated documentation, for example, requiring only a fact find and a record of advice when simple financial advice is being provided. Further to this point, Rice Warner wants more realistic and cheaper levels of compliance.
The FSC is intending to combine feedback gleaned from financial advice industry stakeholders and the Rice Warner research to release a green paper of its own on the subject to help shape policy in this area.
“With advisers leaving the industry in record levels – Rice Warner reports 15 per cent last year and an anticipated fall of a further 36 per cent over the next five years – we need to act now to change the system,” Loane noted.