A member survey conducted by the Financial Advice Association Australia (FAAA) on how the Compensation Scheme of Last Resort (CSLR) funding levy will impact the industry has found the majority believe an increase in client costs and an acceleration of practitioner exits will result.
Specifically, the study revealed 90 per cent of respondents felt the levy will increase the cost of financial advice due to the fact firms will pass on the impost that will see licensees charged $4000 per adviser.
Further, it showed 70 per cent of participants think a reduction in adviser numbers will be brought about by the CSLR levy.
FAAA policy advocacy and standards general manager Phil Anderson noted some of the other negative sentiments expressed by advisers who participated in the exercise.
“Thirty-two per cent expect business profits to fall by more than 10 per cent. Seventy-nine per cent expect that they will need to increase fees to mitigate the increased cost,” Anderson told delegates at the Sydney leg of the FAAA Roadshow held today.
“Fifty-three per cent believe that their recruitment and training plans will be adversely impacted and this is about their plans to get professional-year candidates into your businesses, which is so important to continue to grow our profession.
“Forty-four per cent are aware of colleagues who are intending to leave the profession as a result of the CSLR.”
Other findings revealed 79 per cent of participants want the cost of any special levy spread across the financial services sector on a more even basis, 63 per cent want a cap to be allied to the funding amount paid by the advice sector and 74 per cent said they wanted the operation of the Australian Financial Complaints Authority to better allow investors to make complaints against the management of managed investment schemes and super funds as a whole.
FAAA chief executive Sarah Abood suggested the findings confirmed the intent of the CSLR is disconnected with the program’s practical impact.
“The clear message from advisers is that the CSLR levy will be felt not just by advisers but also by consumers through higher advice costs and reduced access to advice,” Abood recognised.
“The financial advice profession is made up primarily of small and micro-businesses, with just over 15,100 advisers spread across 6073 practices – an average of only 2.5 advisers per practice. These small businesses have little ability to absorb large additional costs.
“We are already seeing signs that the levy is affecting both retention of existing advisers and the pipeline of new advisers. A continually shrinking profession will have long-term negative consequences for access and affordability of advice for everyday Australians.”
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
Articles by Darin