MEDIA WATCH: The cost of financial advice

A couple of items crossed the desk recently that we thought warranted comment.

An organization known as AdviserRatings reported that 9,000 financial advisers have left the industry since 2019, from a pool that totalled 28,000 back then. The article predicts the exodus won’t stabilize until the number remaining falls to about 13,500. That’s a decline of more than 50%.

The main reason it seems for this rush to the exits is unwillingness to meet new professional and education standards, including the requirement for a tertiary qualification, and to successfully complete the FASEA  exam – that is, meeting the requirements of the Financial Adviser Standards and Ethics Authority. Hmmm…..

The article concludes with: “ …the biggest losers in this scenario will be Australians who need financial advice but cannot receive it at a reasonable price point”. With a supply-side squeeze of this magnitude it’s hard to disagree.

Indeed, an article in the Sydney Morning Herald in February this year titled ”Dramatic Rise in Advice fees as Planner Numbers Dive”, quoted a 2020 Benchmarking Study which found the median annual advice fee charged by advisers in 2020 was $3,240, a rise of 16% on the prior year.  Meanwhile KPMG recently estimated the cost to a practice of preparing and submitting initial financial advice is of the order of $5,300.

Seems a bit steep, and puts ARA’s recently announced advice fee schedule in perspective. Without meaning to sound too self-righteous, our aim is to charge a fee that’s fair, reasonable and affordable, and find a way to structure our business to meet that aim.

Having said that, a little more scale would help – without ever wanting to compromise the principles of personal contact and attention that have driven us since Day One.

So after all that, I would note:

  • All our advisers are still on board and settled in for the long haul;
  • All have comfortably met required professional and educational standards and more;
  • If you know or meet someone who’s at a loose end because their adviser has gone missing, we’ll be delighted and ever grateful if you could offer us up as the answer to their dilemma.

Best wishes from all at ARA.

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