According to KPMG modelling, the five key policy recommendations contained in the FSC's latest white paper on financial advice could cut the per-client cost of advice from $5,334 to $3,466.
Those recommendations are:
Some of these proposals are reminiscent of the FSC's "green paper" on advice from earlier this year, although many of the specifics have been altered following stakeholder consultation. For example, the original categorisation proposal split advice into two categories: general information and personal advice, the latter of which could be either "simple" or "complex".
This has been streamlined further so that the sub-categories of personal advice have been eliminated; in the FSC's words, "this distinction [added] unnecessary complexity of the financial advice model. Consumers are less focused on what constitutes simple or complex advice, but instead seek a simple advice process."
The FSC said that if all of the above proposals were implemented, the cost of providing advice to a client would be reduced by approximately 37%. As above, this is based on KPMG's estimate of a $5,334 cost per client under the current regulatory regime over the first six steps of the advice process: identification of needs, meeting with the client, preparation of the financial plan, presentation of advice, signing of the SOA and implementation of recommendations.
In a response to the FSC's proposals, the FPA praised the close alignment with its own five-year policy roadmap, adding that "we commend the FSC on listening to the concerns of the FPA in relation to a number of their proposals which would have added substantial cost and complexity to the delivery of affordable advice to Australian consumers."
"The release of this white paper has demonstrated the FSC’s commitment to joining with us in the discussion of how to put advice delivery back in the hands of professional financial planners," the FPA continued, "and in the reach of all Australian consumers. The financial planning profession will now benefit from a stronger and unified representative voice on the issues most critical to them."
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