New class of financial advisers to ‘save people thousands’

Labor says Australians could save thousands of dollars when seeking guidance on their retirement, life insurance and superannuation as it promises to slash red tape and bring in a new class of financial advisers who will provide simpler advice. Financial Services Minister Stephen Jones said on Tuesday the proposed changes, set to be introduced to parliament next year, would combat a “supply crisis” among financial advisers and make advice more affordable for millions of Australians. Financial Services Minister Stephen Jones says some laws and provisions put in place after the banking royal commission to protect people, while well-intentioned, were not working.

Credit: Alex Ellinghausen “[It] will be a hell of a lot less than the $6000 you would currently pay for your initial consultation for a piece of comprehensive financial advice,” he said. “It will save people thousands and thousands of dollars on the cost of the advice, and thousands and thousands of dollars because they’ve acted on that advice.” Research shows four out of five Australians aged 45 to 54 need financial advice but cannot afford it, and nearly three-quarters of those aged 18 to 34 have unmet advice needs.



Figures from Adviser Ratings in July showed financial advice fees increased by about 7 per cent over the previous year, with a median fee of $3960 a year. Over five years, fees had risen by 58 per cent amid a continuing shortage of suitably qualified financial planners. The first tranche of the government’s legislation to reform financial advice, passed in July, included measures to cut red tape for planners and clarified that Australians could pay for advice on their superannuation using funds from their retirement savings.

The second tranche makes clear that Australians would not be able to use their super to get advice on other areas such as investing in cryptocurrency or the bond market. It also includes the new class of financial advisers – which Jones hopes will help double the existing pool of 16,000 – who would need a diploma and would only be able to provide advice on products issued by a prudentially regulated entity. “This person will not be advising on high-risk, bespoke, novel types of financial products,” he said, and would not be able to charge ongoing fees or commissions.

The financial advice industry has been on notice since the banking royal commission in 2019 found that banks and financial advice businesses had collected up to $1 billion from consumers for advice never given. But Jones said some laws and provisions subsequently put in place to protect people, while well-intentioned, were not working. “What we’ve seen in the past five years in particular are the growth in unlicensed at best, but criminal at worst, sources of information,” he said.

Jones also said some guidelines for financial advisers had morphed into unwieldy risk-management tools, including 100-page statements of advice that he said would be slashed in favour of more concise “records of advice”. “[The statements] are not read by consumers,” he said, noting they had just become box-ticking exercises. “They’re very costly to produce, and they’re not doing what they’re intended.

The objective is to ensure the client walks away with something they can use and understand.” The changes also allow super funds to “nudge” cohorts of customers at key life stages, such as reminding older clients that they could switch from the accumulation phase to the pension phase and pay less tax on earnings from the fund. Cut through the noise of federal politics with news, views and expert analysis.

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