Ever since the first draft of the Future of Financial Advice (FoFA) legislation came out, the advice sector has been trapped in a very big, very confusing catch-22.
The reform intended to make financial advice more transparent and more accessible to Australians. But the new requirements resulted into longer product disclosure statements (PDS) and redundant clauses such as the opt-in obligation.
Extra compliance led to higher costs, which meant that planners could only make advice profitable if they transferred the added cost to consumers. Ultimately, the consumers who could afford the increase were the wealthier ones.
So FoFA did not achieve its final goal to deliver advice to more Australians. And yes, the main impediment to it was... FoFA itself.
Advisers have been caught in this trap for three years. But new research has found that the industry is breaking out from it.
The latest Investment Trends May 2014 Planner Business Model Report shows that practice profitability has gone up in the last year. Financial planners are serving more clients at a lower cost for the first time in years.
While client numbers fell following the global financial crisis, research found that the number of active clients serviced annually has also increased, from 141 in 2012 to 147 in 2014.
Technology and scaled advice are helping advice businesses become more efficient, no matter what issues are being discussed in Canberra.
Research proves what we already suspected: advisers are focusing again on serving clients and growing their businesses. And that they have finally escaped the FoFA catch-22