Financial advisers are demonstrating a commendable commitment to their profession in the face of considerable commercial pressure, according to Synchron Director, John Prossor.
“It is a testament to the commitment of financial advisers that they continue to provide their incredibly valuable service to their clients despite constant financial challenges,” he said.
Mr Prossor said that despite the reduction in income tax to 27.5% for companies with a turnover of less than $10 million, the reality is that self-employed financial advisers are generally faced with ongoing and escalating costs.
“Increased record-keeping requirements and the need to be able to fully demonstrate compliance with the Best Interests Duty obligations take time and time is money,” he said. “The cost of professional indemnity insurance continues to rise and this adds to the financial challenges, as will the introduction of the ASIC funding fee. Then there is the cost of software, ongoing training and product research.”
Mr Prossor said that in recent years, advisers have also been required to register with the Tax Practitioners Board (TPB), twice in many cases. “Advisers have to register individually and, if they own and operate a financial advice company, as a company,” he said. “That’s two lots of fees.”
To renew mandatory membership of the TPB, advisers must complete (or have previously completed) TPB approved courses in Australian Taxation Law and Commercial Law or be a member of a TPB recognised professional association, for example the Association of Financial Advisers (AFA) or the Financial Planning Association of Australia (FPA).
“Currently, most advisers opt for membership of a professional association which adds more to the cost of being in business,” Mr Prossor said. “Ultimately, however, advisers will have to undertake additional studies in order to meet the requirements of the Professional Standards legislation and this means even more time and more money.”
Mr Prossor said these costs are hitting home even before the first tranche of the Life Insurance Framework comes into effect.”LIF will be a reality in only six months’ time and will further impact adviser income,” he said. “And yet, we continue to see new and eager entrants to the profession. It’s reassuring and highly commendable.”