Last week I put out the call for comment regarding the state of the advice market and its views on proposed ASIC changes to the way financial advisers charge fees.
The response from industry participants was quite interesting.
Without meaning to state the obvious, the subject of fees certainly draws a lot of viewpoints.
While a number of those who provided comment were indeed passionate about the proposal made by ASIC regarding moving the advice industry to an hourly-based fee, one adviser's comments stood out from the rest.
The point that really hit home for one unnamed adviser was that despite the proposed changes, it should be noted that while doctors and accountants set a certain number of appointments per day and are able to charge a fee accordingly, advisers are unable to do the same.
"In planning, however, we do not have a set customer number. In fact, you can go for some considerable time at times without seeing many prospective clients," the adviser wrote.
"Of those you do see, most of the industry agrees to an obligation/fee-free first appointment to complete discovery and set goals. There is no guarantee that the client is able or willing to take advantage of the service you offer."
The adviser said as well as there being no guarantee, the advice industry had to commit to large amounts of non-commercial activities, that is, professional development days, ongoing training, compliance and research.
"This is the sad and unattractive fact. If we added up all expenses, including non-productive time used ticking boxes for government and regulator requirements, and added that to the bill, along with all the expenses or running a business, wages, return on equity, there would be very few people who could actually afford advice," the adviser said.
"If we are to apply strict value-for-money principles to planning services, then very few will be able to afford them. If we were to consider full business requirements for commercial return at $350 to $500 per hour, after taking into account all expenses in running the business, and the complexity of many of the plan software packages today, it is common to take eight hours or more to provide the plan document alone, not allowing for research, comparison of existing and replacement products and file maintenance. Can the average person afford $5000 or more for a plan?"
The reality is that financial planners are not charities and cannot afford to offer the same services at a lesser rate.
"Regulators need to understand that how we do business is not like other professional bodies. We do not have the security of knowing that we are going to see eight people today all of which have implicitly agreed to paying a fee before they come," the adviser said.
For those readers who took the time to comment, thank you.
Stimulate new ideas. Stimulate new thinking. Top up your CPD and hear from industry experts with InvestorDaily’s Knowledge Centre. Keep up to date with the latest trends and reforms, all while adding to your CPD. Explore the knowledge centre Knowledge Centre now.
The Australian Council of Superannuation Investors (ACSI) has released research on ASX 200 companies’ effectiveness in addressing and prev...
Citi Australia is taking significant steps to increase gender diversity in the financial services sector on the back of its Citi Women’s S...
The COVID-19 pandemic has created an increased focus on climate change and sustainability, according to global asset manager BlackRock. ...