Reforms aimed at lifting standards in the financial advice industry have led to increased compliance cost for advisers, with adverse impact on consumers in the form of higher fees, a parliamentary hearing was told last week.

Peak bodies representing the profession say they are for changes that will improve the industry but fear what has been proposed and implemented so far, with more to come over the next 18 months, could hollow out the industry, denying Australians access to financial advice.

Many advisers have been forced to raise the fees they charge, with the average cost of a statement of advice up 10% to $2700 from last year.

Not only have the increased fee made it more expensive to seek advice, the situation has left several advisers “deliberately choosing clientele that can afford to pay” in order to survive, the Financial Planning Association (FPA) said.

“Effectively, more Australians are wanting to access advice, but what we are seeing is the affordability of that declining,” FPA CEO Dante De Gori told the House of Representatives Standing Committee on Economics.

“While many of the current waves of reform are welcome and will improve the overall standard of financial advice, their upheaval they are causing creates some significant risks.

“The demand is there, but we are seeing, on two sides, reform and regulation which are increasing the costs and therefore driving financial planning businesses to target higher net wealth clients.”

Association of Financial Advisers (AFA) CEO Philip Kewin, who told the committee the number of registered planners has fallen by 6000 in the past 18 months, agrees cost have increased because of tighter regulatory scrutiny.

“We are seeking smarter regulation, not more regulation,” he said. “Financial advisers have multiple regulators, which means multiple codes to follow, duplicate and conflicting rules and guidance, multiple registration requirements and multiple fees to pay.

“In recent years everything has become a lot more complicated.”

Research shows only about 10% of adult Australians have an active financial adviser relationship, which is not surprising considering the prohibitive cost of seeking advice.

“This trend is reflective of increasing costs and declining income and a need to focus on higher fee-paying clients,” Mr Kewin said. “This is a concerning trend, as financial advice is critical to people of all levels of wealth.

“Financial advice is often misunderstood and the benefits unappreciated by those who don't have access to it.”

AFA GM Policy and Professionalism Philip Anderson says some of the mandatory requirements made by the various regulators are duplicative or inconsistent. He believes there is a “great opportunity” to try to review them and see it from the perspective of delivering the best outcomes for clients in terms of cost.