The federal government's reforms could send Australia's financial planning back 20-years if the issues within the government's draft legislation are not properly addressed, an Association of Financial Advice (AFA) senior member has said.
AFA national president Brad Fox said the association has consistently supported the original intent of the government's Future of Financial Advice (FOFA) reforms, however, he said draft legislation released to date needs some amendments.
"One of the things I note in there is that it looks like what is being put on the table at this stage could lead to significant market concentration to the point where the financial advice market looks a lot like the mortgage market," Fox said.
He said the ability for a small to medium size dealer group to survive under the new regulations is going to be very difficult.
"We've seen it already with Commonwealth Bank [of Australia] buying Count [Financial], but when we get down to the dealer groups with 50 to 100 odd advisers it's going to be so hard for them to make ends meet, deal with the extra regulation and paperwork, the extra layers of supervision," he said.
"It's almost certain that they are going to be looking for bigger partners and that's just going to increase the concentration. It feels a bit like winding back the clock 20 years to the days of tied agents."
Fox said it is now a question for the Independents to consider whether the draft FOFA legislation offers a good outcome for Australian consumers or not.
"The poor independents have so much on their plate but this is an issue that points to the management of Australia's single biggest long-term asset and that's superannuation," he said.
When asked whether with too much on their plate, the Independents might, unintentionally, overlook elements of FOFA, Fox said it was a risk.
"That is a risk but it's important that when anybody is looking at what this is going to do, particularly on the superannuation market," he said.
"We've got to remember the significance of superannuation for the long-term financial stability and affordability in this country."
