Alex Vagliviello

Before any further industry reform with respect to LIF, FASEA, remuneration and professional standards is undertaken, it is imperative that the consequences of the past are put into context, quantified and documented said Alex Vagliviello, Chairman of the United Financial Advisers Association (UFAA).

In calling for an industry study on behalf of the Association, Alex Vagliviello said the toll on advisers has been immense, especially in terms of mental illness. “Very few industries can relate to the two decades of relentless legislative and regulatory changes experienced by financial services, especially the advisory sector”.

“In addition to issues of adviser mental wellbeing, the legacy of constant change has included industry rationalisation, less competition, reputational damage, decimation of advice business values, exit of advisers and advice becoming unaffordable”.

Two decades of industry reform failure and mismanagement have been exposed repeatedly with the most recent being the FASEA exam. While on the surface, the exam may appear noble, the reality is far different, further compounding the distress of many practitioners.

In voicing its objection, UFAA has affirmed the FASEA exam is completely opaque, nontransparent in application and meaningless as an academic industry entry requirement. Nor does it bestow an industry accreditation or even count as a CPD requirement. Yet failure to pass the exam will end an adviser’s business putting an end to their livelihood regardless of years of practice and experience.

Alex Vagliviello continued, “Moreover, constant tinkering with remuneration structures has seen value of practices plummet and the unjust vilification of all advisers for the sins of the few has added to distress. These factors are deterring the next generation from considering a career in advice, further jeopardising the viability of the sector”.

Hence the need for these to be documented and put into context before embarking on further change.

Former adviser and industry advocate, Barry J Daniels said that one of the most disappointing aspects of reform is government and industry not acknowledging and addressing the very real mental health issues of financial advisers.

“Advisers are literally fatigued and the prospects of further reform the final straws – especially for mature age advisers”. “Incessant reform brought about the perfect storm that was further escalated with the demise of practice resale values and BoLR arrangements that were supposed to fund retirement aspirations.

“Is it any wonder that once resilient individuals simply find themselves unable to cope?”

There is also angst amongst those advisers with significant borrowings that funded the purchase of practices / books of clients to underpin business growth plans and provide continuity of service to the clients of the acquired businesses.

The impact on this group cannot be overstated as their plans have been completely derailed as business valuations spiral downwards as the result of pending legislation to disqualify revenues.

Even large institutions that were the initial beneficiaries of industry consolidation are now seeking to divest themselves of their wealth and insurance operations as the regulators obsession with reform has devastated previous profitable business models.

By putting the history of reform into perspective, the two key objectives sought by the UFAA are:

1. an understanding and appreciation of the mental health issues and consequences is derived in order for structured support to be provided to affected individuals. This is crucial for at present far too many advisers are dealing with their mental health concerns alone and without support
2. as context for legislators and industry associations in order to better understand the human consequences of future reform.

In closing, Alex Vagliviello said, “The damage done to the sector in terms of advisers that have left the industry and their financial and mental health has been nothing short of catastrophic.

“However, there still exists a tiny slither of time in which to bring the situation back from the brink – especially in the current environment where the services of experienced practitioners have never been so needed by so many people and businesses in financial distress. Losing advisers now would be no different to losing doctors in the face of a pandemic”.

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Alex Vagliviello

While the Australian Prime Minister calls for urgently needed post pandemic nation building that includes reforms to taxation, housing construction, deregulation and an end to ‘mindless tribalism’ he has overlooked financial services. In particular, the need to remedy two decades of failure that has impacted advisers and consumers alike said United Financial Advisers Association (UFAA) Chairman and spokesperson Mr Alex Vagliviello.

Commenting further Alex Vagliviello took particular aim at FASEA and the federal government’s education and ongoing professionalism reforms for being draconian, harsh and impractical. “Whilst there’s no denying that the reform that commenced in 2001 was needed, the entire blame for the industry’s failures has been directed at the advisory sector and financial advisers burdened with an unending avalanche of compliance and administrative requirements”.

“The findings of the Hayne Royal Commission into the deplorable behaviour (primarily by the major institutions) towards consumers was yet another example of the government remedying the situation by making advisers the scapegoats.

“Enough is enough” affirmed Alex Vagliviello.

Industry reform has been nothing short of regulatory overreach and its legacy:

• Unnecessarily complex and in large parts unclear
• Forced advice businesses to close and practitioners to exit with an estimated 25,000 admin / support staff and paraplanner job losses Put an end to affordable advice
• Legislated and enshrined an unlevel playing field
• Estimated $700m to implement and a further $350m in annual compliance costs

“Advisers are in favour of a strong respected sector comprised of highly skilled and appreciated practitioners that attracts a steady stream of graduate entrants seeking career and self-employment opportunities”, added Alex Vagliviello. “But over the past 20 years the actions of government from both persuasions has resulted in tribalistic outcomes that have benefitted the few i.e. large banks, fund managers, insurers and industry funds.

“All to the detriment of advisers, their businesses and staff.

“But worst of all, it has been the consumer that has been treated with utter contempt and disregard regardless of whichever government was in power at the time”.

Alex Vagliviello cites the FASEA exam as the reform that UFAA members have called out as the much-needed line in the sand.

While on the surface, FASEA’s values, purpose and need for the exam may appear noble – however the reality is far different. This is because the FASEA exam is completely opaque non-transparent in application and meaningless as an academic industry entry requirement. Further, it does not bestow an industry accreditation on passing or as a reference to assist consumers understand or appreciate an individual adviser’s competency.

Insultingly, it doesn’t even count towards an adviser’s annual Continual Professional Development requirement despite the amount of time this exercise entails. Yet failure to pass the exam will end an adviser’s business putting an end to their livelihood regardless of years of practice and experience.

It is for this reason that the UFAA being sympathetic and supportive of its adviser members is now calling for a boycott of the exam and seeking a practical alternative that is both honest, transparent and filled with integrity said Alex Vagliviello.

“Regardless of the narrative put forward by the LNP or Labor, FASEA and the industry is confused and in disarray while over-regulated to the point where it is on the verge of collapse”, said Alex Vagliviello. “Overcome by reform fatigue, advisers are leaving the industry in record numbers with those remaining under severe strain as their businesses cope with a never-ending deluge of administrative and compliance demands.

“In this sense, the sector finds itself unique in that these confusing compliance demands, when compared to other similar industries, is dissuading new entrants considering a career in financial services.

Alex Vagliviello concluded referencing the PM’s call to end ‘mindless tribalism’ and said “There is an epic financial calamity on the horizon for the nation not seen since the Great Depression.

“More than ever before Australians need access to the services of financial advisers to guide them on their journeys back to financial well-being. However, financial advice must be affordable and accessible – hence the UFAA call to the PM for vision and leadership to address the industry’s severe failings and ensure the long-term viability of advisory businesses and the vital services they provide”.

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Commenting further Alex Vagliviello said politicians continue to reinforce the long-held perception that they lack any understanding and appreciation for the role of the adviser and importance of financial advice in supporting Australians achieve their individual retirement, business and lifestyle protection objectives.

The dire results of two decades of financial services industry reform failure and mismanagement with Australian consumers being the greatest losers can attest to this.

“At a time when the nation is facing its greatest economic challenge, access to quality professional advice and service is so crucially needed by Australian consumers, business owners and individuals that have lost jobs, the government has chosen to extend the relief Bill to August”, added Alex Vagliviello.

“Furthermore, politicians continue to ignore the fact that financial advisers are SMEs and are leaving the industry in unprecedented numbers. This latest fiasco will not only accelerate the exodus, but in doing so, condemn their administrative staff and paraplanners to be added to the ranks of unemployed”.

“It simply defies comprehension!”

The rapidly mounting list of dire economic consequences in the wake of the coronavirus pandemic and folly of decisions past are being exposed. Among these are:

• House prices predicted to fall by as much as 30 percent according to CBA.
• Unemployment, to exceed 15 percent predicts the Grattan Institute with the underemployment rate to take the number well over 20 percent.
• Higher rates of bankruptcy as both business and households collapse from lack of income.
• Mental health issues predicted to increase across the board as individuals, families and business owners grapple with bleak financial circumstances.
• Household debt at an eye-popping 200 percent of income, according to the OECD.

So, dramatic are these circumstances that they are being compared to figures not seen since the Great Depression of the 1930’s affirmed Alex Vagliviello.

“From the outset of the resultant collapse in share and property markets brought about by the pandemic, financial advisers have literally been inundated by business owners forced to close their enterprises and individuals made unemployed or required to take leave without pay”.

“All reaching out to advisers needing professional qualified advice in relation to pensions, superannuation, share values, personal and household debt, how to manage cashflow, life insurances, mortgages, etc”.

Hampering access to these much-needed services has been the massive compliance and regulatory burden imposed on the adviser that has made advice unaffordable to the mums, dads, tradies and SMEs that need it most.

Overwhelmed by escalating operational expenses from ASIC fees to professional indemnity costs and their businesses and livelihoods under threat at every turn – is it any wonder many advisers are also facing mental health distress.

Alex Vagliviello concluded, “The failure to pass the FASEA extension bill was not an issue of a simple exam extension but a reaffirmation of the gulf between politicians (and their consultants) and real world of advisers and the benefit they provide to consumers – many of whom now are on Struggle Street as a result of the pandemic”.

“At a time when Australia needs bold and decisive action and a vision charting a return to economic well-being for the good of the people, federal parliamentarians are once again found wanting. They simply don’t care”.

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