Potential Collateral Damage

The CEO of the AIOFP, Peter Johnston, reports on POTENTIAL COLLATERAL DAMAGE.

There is a very serious problem facing the Advice Community which was raised at the NSW Members meeting and will be further discussed at the Victorian Members meeting on the 27th. If you have any suggestions for a solution, please send them through.

If you are attending the Victorian meeting on the 27TH please advise ASAP, we are nearing capacity. The Perth and Brisbane meeting dates and locations will be announced shortly.

The collateral damage of the expected preferential treatment for Superannuation Funds will have a significant affect on the recruitment of new Financial Advisers into the industry. There are always dichotomies occurring with changing momentous circumstances but on this occasion unless the Advice community does something about it, Advisers as we know them, face certain extinction.

Superannuation funds are expected to be given special circumstances where internal staff can be trained to give product and related information to members without the need to comply with the Corporations Law, essentially a ‘carve out’ from the prevailing law. This is where we expect the ‘good advice’ concept may be used.  

This will more than likely lead to Superannuation funds dispensing with carrying the considerable expense of internal fully qualified Advisers and outsource this function to the independent Adviser market who are willing to comply with certain conditions.  

APRA are also putting pressure on Super Funds to mitigate the cost of providing advice to members, we understand some Super Funds are paying well over $300,000 pa to have an internal Adviser on their staff. This cannot continue when a Fund can train a circa $80,000 pa employee to deliver a similar service.

With these inevitable circumstances evolving, the expanding role of Superannuation Funds as an alternate to the past role Banks played as the ‘nursery’ for new entrants to fund the professional year expenses of an emerging Adviser will greatly diminish. With an industry financially struggling with adjusting to the new market conditions over the past decade, most Advice practices cannot afford the additional capital required to subsidise a ‘non – productive’ new staff member whilst they satisfy the professional year requirements.

Unless there is some form of Government subsidy/relaxation or assistance from the product manufactures, Advice practices will need to find an alternative revenue stream to fund yet another expense to stay in business. If unsuccessful, extinction awaits.  

Once Minister Jones has completed his objective of winding back the malicious aspects of FASEA/LIF/Compliance imposts legislation, we think it is time for Government to take a step backwards with getting involved with the commercial aspects of operating an Advice business and allow our industry to finally make its own professional judgements.

We think we deserve and have earnt such consideration.


Peter Johnston | Executive Director
Association of Independently Owned Financial Professionals
Suite 1211, 1 Queens Road, Melbourne VIC 3004
P 1800 111 203, d 03 9863 7574, m 0418 857 621
www.aiofp.net.au | Download my business card

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