In June 2015, CPA Australia announced what it termeed “a gamechanger” for the financial advice industry: a new company – CPA Australia Advice Pty Ltd – to be launched in 2016. With ASIC now granting an Australian Financial Services (AFS) licence and an Australian Credit Licence (ACL) for that new company, CPA Australia Advice Pty Ltd is set to be launched by July 1 this year.
A new benchmark for conduct
Last year when announcing the decision, Chief Executive of CPA Australia, Alex Malley, stated that too many everyday Australians had suffered as a result of poor financial advice driven by conflicts of interest. The objective of the new company was to set a new benchmark for professional and ethical conduct in making independent financial advice available to all Australian consumers.
“Independence is at the heart of CPA Australia Advice,” said Mr Malley in April this year, announcing the granting of the ASIC licenses.
“Our operations will be consistent with Section 923A of the Corporations Act 2001 which allows us to use terms like ‘independent’, ‘impartial’ and ‘unbiased’ when referencing our services.
“We’ll also be consistent with APES 230, the accounting profession’s standard for members engaged in the provision of quality and ethical financial planning services.
“We are about putting an end to conflicts of interest in financial advice.
“This is our model because our focus is on what is right for the person seeking the advice, not what is financially beneficial for the advisor.”
Mr Malley said that CPA Australia Advice will involve no commissions, no hidden incentives, and no asset based fees. So will the cost of the service be economic for account customers?
Cost of financial advice
Does the average consumer benefit from receiving financial advice, over and above the cost of that advice? Various reports commissioned by the financial services industry have concluded yes, but there may be a disconnect between what consumers expect to pay for advice and the actal cost of advice.
An ASIC report (Access to Financial Advice, Decemeber 2010) found, indeed, ‘a significant disconnect between the amount consumers are willing to pay for financial advice and the typical costs to licensees of providing financial advice’. It found that on average, consumers believed that initial advice should cost $301 and ongoing advice should cost $298 per annum. Twenty-two per cent of consumers believed that the initial advice consultation should be free. The regulation impact statement recorded further that the cost of providing comprehensive financial advice to a client actually ranges between $2,500 and $3,500.
IBISWorld estimates that the financial planning and investment advice industry generates annual revenue of approximately $5 billion.
“Over the past few months we have been holding information sessions with our members around the country explaining how CPA Australia Advice will operate,” said Alex Malley.