January 24, 2012
MORE than 35,000 financial advisers and support staff could be driven out of the industry under an alarming prediction from the financial planning industry, which fears that sweeping legislative changes will swamp their businesses in red tape.
Amid predictions of job losses in the banking industry as credit growth slows, senator Bernie Ripoll's Parliamentary Joint Committee into the Future of Financial Advice (FoFA) legislation hearing yesterday fielded protests from a number of industry bodies.
They are concerned that the proposed July 1, 2012 start date for the new laws covering advisers is too soon and that the legislation as its stands is poorly drafted.
Many also object to parts of the legislation that ban trailing commissions, demand more transparency over fees charged and expose advisers every two years to the risk of being effectively sacked by their clients.
While some dismissed the talk as merely an ambit claim, the committee was told that the legislation designed to improve the quality of financial advice in Australia would have the reverse effect, driving out planners.
Although there are between 15,000 and 18,000 authorised financial planners working in Australia, many of the big banks in particular have significant numbers of back-office staff working to support them.
Association of Financial Advisers chief executive Richard Klipin said the losses over coming years could reach 35,000 once the cuts flowed through to back-office personnel.
Financial Planning Association chief executive Mark Rantall told the hearing in Sydney the government's own Regulatory Impact Statement accompanying the draft legislation quoted figures produced by consultants Rice Warner that adviser numbers would drop from 15,400 now to 8600 in the year 2024, "which the FPA submits is actually counterproductive to the proposed guiding principle" of FoFA.
Craig Meller, managing director of AMP Financial Services, one of the biggest wealth management groups in Australia, said his organisation had "consistently supported the principles underpinning the planned FOFA reforms".
He said the aim was to lift the professionalism of financial advisers and enhance consumer confidence in the industry by replacing trailing commissions with fees for service -- plus "most importantly, increasing access to and the provision of advice".
But he said that "one of AMP's overriding concerns is that the bill has been rushed in its drafting and that if enacted in its present form, it would have deleterious impacts on customers, financial advisers and the community".
He said it would affect advisers first and that "we believe this could lead to losses of up to 25,000 jobs. We also fail to see how this will improve access to advice.
"There are so many problems with the bill that a rigorous stocktake is necessary and substantial additional work needs to be undertaken to get the drafting right."
As it stood, he said it would impose costs of "hundreds of millions of dollars . . . in capital expenditure to cover required computing, training, product disclosure statements, printing and auditing".
John Brogden, chief executive of the Financial Services Council, which represents the big financial planning networks, told The Australian that FoFA in its current form would "see a contraction in the market in a number of areas".
"Planners will leave the industry because of the cost of compliance," Mr Brogden said.
"Many of them will sell their businesses and there will be job losses from the inevitable streamlining that will follow.
"The only way that the larger firms will manage will be by reducing the number of roles in the back office."
Article by Andrew Main From:The Australian