Advisers optimistic in the face of reform
Financial advisers have the determination and ability to adapt and grow despite ongoing industry changes, according to research released yesterday by the Association of Financial Advisers (AFA).
AFA CEO Richard Klipin said that the “Tides of Change” research into adviser attitudes towards the Future of Financial Advice (FOFA) reforms, which was conducted by CoreData/brandmanagement and supported by NAB Financial Planner Banking, demonstrates that advisers have the maturity, flexibility and adaptability to competently and effectively cope with change.
“While advisers are clearly concerned about the proposed reforms, they are also supportive of a number of initiatives and recognise the opportunities that are likely to arise from them,” Mr Klipin said. “For example, while a majority of advisers, that is 57.2%, indicated that they are concerned about the intra-fund advice reform, only 47.1% expect it to have a negative impact on their practice.”
Mr Klipin said the research indicates that these advisers believe intra-fund advice could cater to a segment of the market that does not yet need fully-fledged advice but may need it further down the track and may therefore be more likely to seek professional financial advice.
However, he said the research also shows that advisers harbour very deep concerns about how other FOFA reforms will affect their clients and their businesses.
“Many advisers believe the FOFA reforms may increase paperwork, drive up costs and undermine the long term nature of advice,” he said. “A number of the proposals seem likely to have the unintended side effect of making it more difficult for people to get financial advice.”
CoreData/brandmanagement’s Andrew Inwood said the research shows advisers fear that some of the proposals will put the financial future of their clients at risk, rather than safeguard them.
“Adviser support was strongest for the introduction of a statutory fiduciary duty and weakest for the proposed annual opt-in reform,” Mr Inwood said. “However, despite their concerns, 77.8% of practice principals believe they are likely to grow their business within the next two years, while just 21.1% say they are likely to sell their business and only 17% believe they will leave the industry. This reveals a healthy ‘can-do’ attitude on the part of most practice principals. The entrepreneurial spirit is alive and well in the financial advice industry.”
Shane Kirsch, National Manager, NAB Financial Planner Banking, said that the findings of the “Tides of Change” research provides a better understanding of the current mindset of advisers and their views of the impact of the impending FOFA reforms.
“This information is invaluable in helping us to better understand the likely impacts on adviser businesses and how they can be helped through this transition period,” he said.
The key findings of the research revealed:
- The advice industry is divided over the prospective ban on commissions, with two in five advisers opposing the reform (42.8%) and a further 36.1% strongly supporting it.
- While the majority of respondents (56.9%) anticipate a negative impact on them, one quarter of respondents (25.2%) feel the ban on commissions will have a positive impact on their clients and almost one third (30.5%) say it will have no impact.
- Of all the reforms, respondents are most opposed to the proposed requirement for clients to opt-in annually, with three in five (59.2%) giving a rating of 0-3 out of 10. Practice principals are the most likely to not support the reform (64.5%).
- Contrary to the opt-in reform, there is strong support for the introduction of a statutory fiduciary duty for financial advisers, with three quarters (76.2%) indicating strong support.
- There is considerable opposition to the expansion of low-cost simple advice, with more than half of respondents (57.2%) not supporting the intra-fund advice reform. Practice principals are the most likely to foresee intra-fund advice having a strong negative impact on them (22.3%), while almost half (47.1%) expect a negative impact on their practice.
Click here to read the report.
Click here to read financial adviser’s comments on the report.