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[The Wrap] Let's not follow what's happening in Australia

This week’s Wrap is a sobering one and one with some lessons from Australia we don’t want to repeat.

Friday, September 6th 2019, 10:00AM 3 Comments

by Philip Macalister

I’ve been in Australia for the past week and it’s clear that the financial advice industry across the Tasman is in crisis.

The most awful story is that in recent times around 18 financial advisers have, reportedly, committed suicide because of the increasing pressures put on the industry.

This is a combination of stress, financial pressure and adviser bashing.

But it's also that advisers are having to justify themselves and what they do.

It’s a salient warning to New Zealand advisers considering entering into the new regulated regime.

Make sure you can cope with the increased pressures that will come with compliance.

But also advisers, and others, have to do a much better job of telling people the good they do. If there was ever a time to see leadership and for people to stand up and advocate for advisers it is now.

To me transitional licensing looks too easy; Like the spider and the fly: "Will you walk into my parlour?  'Tis the prettiest little parlour that ever you did spy."

But there are other stories coming out of Australia about the pressures on advisers.

During the speeches during the traditional ANZAC adviser function at MDRT, an Australian adviser next to me made it clear they were just surviving.

Back in Auckland, at the recent Financial Advice New Zealand conference, chair of the Financial Planning Association of Australia Marisa Broome sat on a panel discussing culture and conduct.

Her message was don't follow us. User pays has been thrust on advisers and it's driving people out of business.

"I'd hate to see that model here," she said. "It's killing our business."

In one example she said it cost her $700 to file some documents last year; this year the cost was $7,500.

She runs a practice of six people including three advisers. Costs for regulation had increased from around $5,000 a year ago to $50,000.

Regulation meant she was losing her competitive advantage and the rising costs meant fewer people are now able to get access to advice. Remember in New Zealand this government and the previous one have said the changes to the Financial Advisers Act were all about making sure more people can access advice.

The takeout for New Zealand: Do not follow what has happened in Australia.

Fortunately, Financial Markets Authority chief executive Rob Everett was sitting on that same panel. Pity, neither the Minister of Commerce, Kris Faafoi, nor MBIE officials were there (from what I could see).

Tags: compliance Financial Advice New Zealand FMA licensing Opinion regulation The Wrap

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Comments from our readers

On 10 September 2019 at 6:36 pm JPHale said:
It's a shocker alright. And the industry knows that an insurance adviser is eight times more likely to claim for a mental health disability (old stat and now probably worse)

The external commentary has long been because advisers know how to claim. Maybe a few cases, the majority it is significant and serious impacts that are very real.

Compassion fatigue is a term I had not heard prior to becoming an adviser, and I hear it more today than I have done prior, the impact of wholesale change compounded by the day to day life of an adviser will become a serious issue,

Just this week I have had one adviser thank me for my help and support with a client's claim, because they are not equipped to manage it, and it's a tough one psychology for all concerned.

A BDM commented this week, wow there is so much more to what you have to do for clients than people understand.

Yup, when the smelly stuff hits the whirlly thing, life advisers are often the only ones standing, making sense and paying the bills.

And many away from the coalface don't appreciate this, and nor do they value it, until they themselves need it.

The joke is life advisers only come out at night, aka vampires. More they only come out at night because they spend their days advocating for their clients in all manner of ways, and client's today are only together when they get home at night.

Advisers work to ensure people are protected, they have certainty, and they aren't exposed to unnecessary stress and pressure when they face the hardest times of their lives.

Too often the reasons and needs for cover are forgotten, the reality is far more sobering,
On 11 September 2019 at 7:37 am Pragmatic said:
There are many factors working to the advantage of the NZ industry that should help to build a sustainable and enduring financial services industry. Leading the charge is the retreat of the aggregated vertically integrated industry participants, in favour of returning to a fragmented cottage industry. This reverts back to the "old days" where advisers sold 'trust'

When all is said and done, the large Australian aggregators acquired much of the Australian advice industry, expecting to channel all client monies into their underlying products. This simply didn't work, with most of the larger groups now in various stages of untangling the mess. Ironically, many Australian advisors are now re-enjoying the freedoms of running their own practices where they are there to serve their loyal clients. We simply haven't seen this occurring in NZ to the same extent... with a vibrant unencumbered advice industry throughout the country.

The choker for both the Australian (and potentially) the NZ financial services industries will be the over-reaction and consequent butterfly effects of meaningless regulations. Whilst the heightened Australian regulatory environment is supposed to protect consumers, the impact will be to force up costs, limit advice to a smaller universe, and drive consumers to self-drive / computer-assisted advice. All this at a time when the large aggregators (arguably representing a high proportion of the industry rogues) have declared their departure from the industry.
On 11 September 2019 at 2:41 pm Eyeinthesky said:
I quote Hon Kenneth Hayne AC QC in his final report to the Governor General from the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry;

"As I said in the Interim Report, adding a new layer of regulation will not assist. It will add to what is already a complex regulatory regime. No doubt the financial services industry is itself complicated. That may be said to explain why the regulatory regime is as complicated as it is. But closer attention will show that much of the complication comes from piling exception upon exception, from carving out special rules for special interests. And, in almost every case, these special rules qualify the application of a more general principle to entities or transactions that are not different in any material way from those to which the general rule is applied."

It is probably already too late here.

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