Senator Jane Hume, Minister for Financial Services asked the question how does the profession provide accessible, professional and affordable advice?
The Minister was speaking to Helen Dalley at the FPA’s Virtual Congress live Special Event (3/9/2020).
To my mind the future of accessing affordable advice lies with the same business model for medical practitioners. After all, without advice financial stress* can lead to medical conditions such as depression, migraine, cardiovascular disease, insomnia, and more. Therefore it makes sense to look to the medical profession for a business model to help all Australians receive the advice they need.
New business model
To introduce a new business model for accessible, professional and affordable advice it is a worthwhile comparing a financial planning practice to setting up a medical doctor’s practice and what it entails:
- Qualifications – Attend medical school at a university
- Experience – Enter medical programs
- Professional Year – Become a medical student
- Membership – Become a member of the AMA
- Self employed or employed – Enter into private practice or the public hospital system
- Ticket to trade – Gain a Bulk Billing code number to charge patients.
After FOFA and FASEA legislation became law a practicing financial adviser’s business model is almost the same as a doctor’s practice with the exception of the AFS Licensee requirement and Bulk Billing.
Abolishing the current business model
AFS Licensing system is now unnecessary red tape. A licence is not required in a business model for a financial planning practice because commissions are almost banned. However… the role licensing is more of a resources function providing services to a practice like sourcing:
- Professional Insurance cover
- Training for the new adviser Professional Year
- Maintaining records
- Appropriate software and data management
- Professional standards and interpreting laws
- Staff training
- Document templates
- Fee charging models
- Branding of services
- Thought leadership
- Paraplanning services
- Pre-vetting and auditing advice
- Systems and procedure manuals
- Investment philosophy
- Product research
- Billing and debt collection services
Bulk billing advice
There are 40 steps to give advice without breaking the law. Either the government reduces the red tape containing laws and regulations or introduces bulk billing for essential financial advice for important Advice services such as debt management, superannuation and insurance otherwise the Australian population will end up on the Age Pension and broke because Advice was unaffordable and inaccessible.
The cost of Advice has steadily increased to be more than $3,000 per client/family. It is not in the client’s best interest if their adviser goes broke giving them Advice. Something has to change, either red tape is reduced or Bulk Billing is introduced to help all Australians receive essential advice and avoid financial stress.
My proposed new business model will help all Australians receive accessible, professional and affordable advice.
I welcome your comments and debate below:
* Ref: Journal of Social Science and Medicine, August 2013