Reflecting on 2014 Connect Financial Service Brokers (Connect) CEO Paul Tynan has described it as another year of “work in progress” that has left an everlasting imprint in the financial services landscape. It has been a period where lobbyists on behalf of special interest groups and product providers have been trying to cement their positions and where the advice profession has struggled to reclaim the agenda.
Most importantly, it has pushed the advice sector closer to being recognised as a true profession alongside doctors, lawyers, etc and will attract new entrants in growing numbers in the years to come.
Commenting further, Paul Tynan said there is still much work to be done and many challenges ahead. He welcomed the recent Murray Report and the findings that drove home in the most forthright manner that the focus must be on the consumer and his / her financial well being.
“The industry has had enough of product providers lecturing the advice profession on what is best practice especially when the majority of the recent high profile disasters such as Storm, etc have been associated with a major institution. These disasters and their links to product providers has shaken and tarnished the industry’s reputation and it’s no wonder there is such deep cynicism and lack of trust by consumers.”
“Under the microscope of FoFA legislation and the Murray Inquiry we have seen the continual struggle between product and advice and this has highlighted that some businesses are more comfortable in providing general advice and not personal advice”.
As he looked back on the past 12 months, Paul Tynan saw the following as the key events that had the most significant impact:
– The new ASIC adviser register
– The tax practitioners board is now a reality for financial advisers
– The SMSF exemption for accountants is now a reality
– The lobby groups have earned their money in 2014
– The politics of FoFA continued throughout 2014 which caused uncertainty for advisers
– The profitability and selling practices of life insurance practices came under the spotlight
– The rise in educational standards for new entrants and existing planners has been debated, canvassed and will be a reality
– The banks and AMP announced new education standards for staff and advisers
– The industry and educators continue to struggle with non-technical and soft skills education
– Advisers are unhappy with the institutional dealership structure and many breakaway groups are now in play
– Banks have learnt that running a wealth management business requires different management skills than those required for banking
– Consumers are still fighting for satisfactory outcomes from Storm, Timbercorp and Great Southern
– Enforceable undertakings are standard practice for banks
– Lawyers and business consultants have done well from the work provided by banks / ASIC
– van Eyk entered into administration
– Ray White has set its sights on advice
– Paul Barrett has come back with the Next Generation Advisory offer
– Everyone is a SMSF expert (let’s borrow money to invest in property)
– Product providers are starting to push income stream longevity risk as an issue as the UK goes the other way
– Salaried planners are looking to move in to the self employed world
– The Rabo adviser is coming
– Shadforth was taken over by IOOF
– Selling of planning businesses has been restricted by FoFA
– Centric Wealth was taken over by Findex
– Matrix was taken over by ClearView
– Infocus Wealth Management merged with Patron Financial Advice
– Use of social media and outsourcing of services continues
– ASIC continues the line that the advice industry is not a profession
– Everyone is a succession planning expert but the reality is that the industry continues to struggle with succession planning
– The trend of ‘let’s have an inquiry’ into the financial services industry continues with the latest being the tabling of the Financial System Inquiry (Murray) report.
– The findings of the Financial System Inquiry will no doubt be the platform for heated debate between the Financial Services Council and Industry Funds.
– Rumours of the demise of financial advice / planning have been exaggerated – there are still more buyers of advice businesses than sellers
– The debate about non-aligned licensees versus institutionally owned licences intensified
– Superannuation and retirement assets hit $2 trillion FUA at June 30
– For those considering being a whistleblower – look to bank staff members and advisers
– ASIC appointed an external expert to monitor compliance with conditions placed on CBA licensees
– AMP shuts down Genesys
– ASIC’s review of the life industry into its profitability and selling
– The FoFA amendments are voted down in the Senate
– Commonsense prevails and the grandfathering amendments go through the Senate
– Two new presidents of the advice sector’s peak bodies – FPA and AFA
– SMSF market continues to expand as the largest part of the super pie
– Everyone has become an expert in SMSF and property marketeers will be the next ASIC enquiry
As he reflected on the year that was and then looked to the future, Paul Tynan identified three areas that will have the most profound impact on the industry in 2015.
The first key factor is the single greatest issue confronting not only the Australian economy – but the economies of most mature developed countries will be the exit of Baby Boomers into retirement. The retirement sector will be impacted by the Baby Boomers moving from accumulation to income and fund managers are quickly discovering the importance of annuities.
Second, SMSF will continue to be the big winner as consumers’ level of sophistication increases and they demand greater control and direction of their retirement journey and destination.
Thirdly, the elephant in the room! “Everyone has their own opinion about the vertical integration model which has been around for years but now due to new transparency the true negative effects of subsidy costs, product sales and cultural issues it focuses intense attention on these structures. Their impact on consumers is being examined in the light of working in the new post FoFA world of best interest for the client”.
“Some institutions are still standing by their buyer of last resort (BOLR) structures but they will not be able to survive in the new environment that demands always working in the best interest of the consumer / client. 2015 which will see many more changes – but all of them are working towards an industry that will be a global benchmark for the provision of consumer focussed advice.”
Paul Tynan concluded by saying that he has never received so many end of year enquiries from advisers seeking to leave their dealer groups, operate under their own AFSL, sell part books of business, put their businesses up for sale or leave salaried positions with the institutions to operate as independent fee for service practices.
2015 is shaping up to be landmark year in the history of Australia’s financial services advice sector.
