Industry association chiefs believe too much focus on high net worth clients is not a good outcome.
The Future of Financial Advice (FOFA) reforms may cause financial planners to abandon their low-value clients and while scaled and intra-fund advice will service them, the gap between high and low-end clients will widen.
The DEXX&R market projections report said the FOFA reforms might have the greatest impact on the personal superannuation segment.
The report said clients with smaller account balances and those making contributions of less than $10,000 per year might be less willing to accept a minimum advice fee of $1500 to $1800, for example.
"As a result, many advisers will focus exclusively on high net worth clients where advice fees represent a smaller component of the total client funds under advice," it said.
FPA chief executive Mark Rantall said one of the flow-on effects from FOFA would be that planners focused on their mass affluent clients.
"The lower-balanced, lower-income clients would be serviced by the industry super fund networks and possibly some banking networks," Rantall said.
"This is not necessarily a good outcome and doesn't necessarily lead to more Australians getting more advice."
He said the priority therefore was to determine whether scaled advice would "provide a fillip to enable lower-income earners to get one-off advice in an effective way" and ensure that it was not overregulated.
Association of Financial Advisers (AFA) chief executive Richard Klipin said while a segregated advice landscape of high and low-end clients was not desirable, "getting some advice is better than getting no advice".
"FOFA will fundamentally transform the advice market," Klipin said.
"There's no doubt [that] what FOFA's done is [shifted] advisers' focus onto high-value clients.
"They will focus on the segments that best meet their services - people with the need and the capacity to pay."
He said scaled and intra-fund advice were clearly part of FOFA's design as people with less complex needs could access less complex and cheaper advice, however, the AFA wanted to see an even playing field.
"We want to make sure that the consumer protection mechanisms you find in the current regulatory environment extend into intra-fund and scaled advice," he said.
"'Know your client, know your product' must be as relevant in scaled advice as it is in holistic advice."
In addition, Rantall said the impact statement under the explanatory memorandum for FOFA indicated there could be a potential reduction of financial advisers by 40 per cent over the next 25 years as a result of the reforms. He said the FPA was also watching that closely.
