Australia’s financial advisory and superannuation sector is expected to experience further upheaval in the next 12 months, with the potential for planner departures and super fund consolidation increasing, according to an industry chief.
Financial Services Council (FSC) chief executive John Brogden made the claims at yesterday’s FSC Deloitte Leadership Series lunch in Sydney.
“No other sector will undergo as much change as financial advice will in 2012,” Brogden said.
“The two Future of Financial Advice (FOFA) bills in Parliament will drive a wholesale restructuring of the advice industry and the manner in which advice is provided.
“There will be continued mergers in the financial advice segment. Increasing cost pressures from regulatory reforms will mean only providers with sufficient scale able to make the required investment in systems and training will be able to absorb costs and remain competitive.”
In 2012, the introduction of FOFA would prompt more advisers to leave or sell their businesses under the pressure of increased costs and compliance, he said.
“Should the new regime not stymie innovation and greater flexibility in the provision of advice – there is also great opportunity,” he said.
“The critical outcome of the FOFA legislation must be the creation of a workable scaled advice framework.”
Between intra-fund advice and comprehensive financial advice, there were new forms of affordable advice that could be provided, he said.
“A regulatory framework that facilitates genuine scalable advice will open up new markets of millions of consumers,” he said.
“The company that gets their model in the market earliest will have a massive first-mover advantage.”
In terms of superannuation, he said the introduction of MySuper and SuperStream would lead to minor changes to the consumer experience which, in contrast, would result in years of significant structural change in the industry.
“MySuper will see the dominance of industry funds in simple, low-cost superannuation aggressively challenged by retail players,” he said.
“BT and AMP launched new products in this segment in recent years, whilst Colonial First State discounted its existing mass-market product. ANZ Wealth launched a new product this year.”
Consolidation of superannuation funds would accelerate in 2012 and over the next five years, he said.
He said while regulatory reforms would not impact on funds management to the same extent as other segments, the sector would feel indirect pressures.
“Both FOFA and Stronger Super will intensify cost pressures across the industry and affect the way superannuation monies are invested – by advisers and superannuation funds,” he said.
As a result, Brodgen also predicted there would be an increase in direct investment in equities and exchange-traded funds as advisers searched for ways to offset the higher costs of providing advice.
As part of the FSC agenda in 2012, he said the council would continue to promote an industry that built the wealth, protected the lives and secured the retirements of all Australians.
