The peak bodies for advisers and financial planners have again flagged concerns over the impact of regulatory reforms on their members,  saying changes have led to financial and mental health challenges.

Appearing before the Standing Committee on Economics last week, the Association of Financial Advisers (AFA) and Financial Planning Association (FPA)  said costs have risen so significantly that members who have chosen to remain  have had to raise fees in order to stay in business.

“It’s really important that I think  we understand the mental impact and anxiety that are  occurring in the profession, and look to how we can support the profession moving forward,” FPA CEO Dante De Gori  said.

“It’s the FPA’s view that in its approach to regulating financial advice, the government needs to consider the totality of these changes and how they’re  affecting the long-term viability of the financial planning profession, and the cost and accessibility of financial advice to consumers.”

He says the financial planning profession is going through an “unprecedented” period of change, one that has led to a few consequences including a decline in planners.

“Financial advice is in the national interest,” Mr De Gori  said. “It’s our belief that all Australians  should have  access to quality, trained  financial planners.

“We have a  government and an opposition, and a regulated group who have all publicly acknowledged the cost of practice being a massive barrier for ordinary Australians’ access to  advice.

“The time is now to take action and do something about it.”

The FPA again touched on the formula used by the Australian Securities and Investments Commission (ASIC) to calculate the levy each financial  services  sector must contribute to support the regulator’s supervision work.

“The question for us is the formula,” Mr De Gori  said. “We don't believe the way the formula is calculated and the way it’s dispersed is equitable and fair and that’s the crux of it.  We want that to be reviewed.”

ASIC released last month its Cost  Recovery Implementation Statement  2020/21  for consultation, estimating it will collect about $72.246 million in overall levy from the financial advice sector. About $54.281 million will come from cost recovery levies and the other $17.965 million from statutory levies.

AFA  National President Michael Nowak told the committee that the levy  advisers  pay to ASIC has more than trebled to $3138 in the last three years. And that is not counting other compliance fees they have to shoulder and new ones that are looming such as the proposed Compensation Scheme of Last Resort.

“The increase in costs has come from I guess, a dramatic increase in the regulatory requirements,” Mr Nowak said. “We believe the consumer protections are important, but [a] balance needs to be made.”

He cites life insurance advice as an example where the profession is straining to keep up with the cost burden.

“Advisers are generally saying that unless there is a premium of $5000… it becomes prohibitive to provide that advice,” Mr Nowak said.

He told the committee that  financial adviser numbers have fallen from nearly 29,000 at the time  of  the  Hayne royal commission’s  final report  in 2019 to just over 19,000.

“We believe that the system is now broken,” Mr Nowak said, adding  “the most critical impact of all of this is that financial advice has rapidly become inaccessible and unaffordable for everyday Australians”.

Synchron  Director Don Trapnell, who also appeared before the committee,  says the industry is at a “crossroads” following the Hayne royal commission as many  struggle  to address the  range of  regulatory  reforms.

He says advisory businesses like  Synchron  are being unfairly imposed with “horrendous” costs, forcing many advisers to leave the industry.

“There’s no longer much incentive to become part of our industry, the costs and the risks steadily outweigh the rewards,” Mr Trapnell said.

“If something is not done urgently to address the impost of over-regulation and over-taxation of the small business life insurance adviser, advised insurance protection will become the province of the elite leaving Mum and Dad exposed.”