Financial advice and funds management are two separate sectors and should be reviewed independently of each other, according to the Financial Planning Association (FPA).

The Productivity Commission’s inquiry into competition in the financial system listed the two as one segment.

“Consumers seek financial advice to get advice,” the FPA says in its submission to the inquiry. “The primary role of a fund manager is to implement a fund's or client’s investment strategy and manage its trading activities.

“Financial advice must be in its own category for this inquiry so the commission can differentiate the different types of financial advice; and identify the different competitive issues confronting each financial advice type.”

The FPA submission also urges the Productivity Commission to consider the implications of the cumulative effect of regulatory costs on competition in the advice market.

The Government’s cost recovery approach to regulation has created additional expenses for advisers, who may also have to spend more time away from servicing clients in order to complete their compliance requirements.

“The commission should be aware that the regulatory requirements in the financial advice space significantly impact on market competition,” the FPA says. “This is particularly an issue for smaller businesses who do not have the benefits of economies of scale to overcome the issues associated with regulatory burden. 

“We suggest that it is important to understand and consider the problems facing financial advice providers in order to identify appropriate measures for assessing competition and innovation in the advice market.”