As a financial adviser with over 15 years of experience, I’ve witnessed the financial advice profession undergo profound and necessary changes. These reforms, while challenging, were instrumental in raising the industry to a professional standard that inspires trust and delivers better client outcomes.

However, the government’s constant tinkering with education and regulatory requirements risks undoing this progress and returning us to a system that prioritises price over quality – at the expense of clients.

The introduction of higher educational standards was a watershed moment for the industry, ensuring advisers possessed the knowledge and ethical foundation to guide clients through increasingly complex financial landscapes. But the unintended consequences were significant. Adviser numbers halved, dropping to approximately 15,000, just as demand for advice surged. With fewer advisers available, the cost to serve naturally increased, reflecting the added pressures on those remaining in the profession.

Rather than staying the course and allowing these higher standards to mature and stabilise the profession, the government is now proposing to lower barriers to entry by introducing a new class of diploma-qualified advisers. These advisers would handle “simple” advice tasks, such as insurance recommendations or basic retirement queries, but the implications of this move go far beyond the stated goals.

The Risks of Lowering Standards

Reducing qualification requirements may temporarily address the “supply crisis,” but at what cost? Introducing a wave of under-educated, under-experienced advisers risks flooding the market with well-intentioned individuals who lack the depth of knowledge required to navigate even basic financial situations. Financial matters, no matter how simple they appear, often carry complexities that can have lasting consequences.

The likely result? A return to poor-quality advice, as seen in years past, where insufficient oversight and expertise led to scandals, financial mismanagement, and a breakdown of trust. The notion that lower costs equate to better outcomes for clients is misguided. Clients deserve professional, well-considered advice – not advice that is “affordable” at the expense of quality and precision.

A Short-Sighted Approach

While the government points to potential cost savings of up to 40%, this ignores the long-term harm that substandard advice can cause. Poor financial decisions stemming from inadequate advice could lead to unfulfilled goals, financial losses, or even retirement insecurity. Such outcomes undermine the very purpose of financial advice: to empower clients to make informed, confident decisions about their financial futures.

Moreover, reintroducing banks and insurers into the advice space under this new framework compounds the risks. The conflicts of interest inherent in vertically integrated models, which the Hayne Royal Commission so starkly exposed, will inevitably resurface. This move threatens to erode the trust and transparency the industry has worked so hard to rebuild.

A Better Solution

Rather than lowering standards, the government should focus on solutions that maintain the professionalism of financial advice while addressing accessibility and affordability challenges:

1. Support the Adviser Pipeline: Scholarships, subsidised education, and mentoring programs can attract and retain high-calibre professionals.
2. Invest in Technology: Harness advancements to deliver streamlined advice processes without compromising quality.
3. Encourage Longevity in the Profession: Incentivise experienced advisers to remain in the industry and mentor new entrants, fostering a sustainable balance of expertise.

The financial advice profession has made great strides, earning its place as a trusted, indispensable service for Australians. Diluting standards risks eroding this trust, leaving clients vulnerable to poor outcomes. Lower costs may make advice more accessible in the short term, but the long-term consequences – both for clients and the profession – are dire.

The government’s focus must shift from quick fixes to sustainable strategies that protect both the integrity of the profession and the financial security of the Australians who depend on it. Clients deserve better than what this new proposal offers.

About Kurt Purkiss

Kurt Purkiss is a financial adviser with over 15 years of experience providing top-tier advice to clients across a range of complex financial matters. As the Responsible Manager of Lambourne Financial Services Pty Ltd and Director of Lambourne Partners Wealth, Kurt plays a pivotal role in shaping the future of financial advice in his community.

Book a meeting or get in touch with Kurt below.