When the Future of Financial Advice (FoFA) laws were introduced in 2013, the officially pronounced aim was to “improve the trust and confidence of Australian retail investors in the financial services sector and ensure the availability, accessibility and affordability of high-quality financial advice”.

Six years on, trust in financial advice remains near its low point in the wake of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. And, based on the findings of the Licensee Research, advisers are actively rethinking how many clients they can and should be providing services to.

Central to this is the so-called fee-for-no service issue, and whether advisers are delivering to clients not just what they say they will deliver, but whether they are, in some cases, delivering anything at all in return for the fees they receive.

The 2019 CoreData Licensee Research reveals that advisers claim to personally manage 202 clients each, on average, and they personally meet less than three-quarters of those clients once a year. This figure has been roughly consistent over three years and speaks to two potential issues.

First, it looks on the surface like a fee-for-no-service issue may persist, at an industry level. And second, if advisers cut back on the number of clients they actively manage, to focus on providing appropriate ongoing service to all clients they manage, there’s likely to be a significant number of individuals cast adrift and looking for new advice relationships.

If the average adviser “personally manages” 200 clients, but only sees around 150 of them each year, that’s about 50 clients per adviser per year who are potentially not receiving the sort of ongoing service that would satisfy the regulator that the adviser is doing enough to justify charging an advice fee.

In this scenario, an adviser may move the clients on, or may commit the time and resources necessary to provide an appropriate level of service. Providing that service may lead to higher costs of advice – almost half of advisers say they will reprice their service offering in the year ahead, and that’s a significant increase on the number of advisers who intended in 2018 and 2017 to do the same thing.

And there’s evidence that advisers are focusing more on retaining and servicing existing clients today than they were two years ago. Licensee research in 2017 found that two-thirds of advisers were focused on growing client numbers, and only one-third focused on retaining existing clients. Today it is essentially 50/50 (50.7 per cent and 49.3 per cent, respectively).

The second issue the latest licensee research may be pointing to is the possibility of a spike in the number of unadvised clients, as advisers focus energy and resources on serving profitable clients. It is anyone’s guess how many clients may be jettisoned as advisers refocus and what happens to those clients when the advice relationship is severed.

The presumed natural home for these clients – that is, the banks – are in disarray when it comes to advice. ANZ is out of the game, and Westpac will be out of it later this year; Commonwealth is withdrawing in a somewhat piecemeal fashion (it has sold Count Financial and has announced it will close Pathways network, but is holding on to Commonwealth Financial Planning); and NAB is divesting its licensees into a wealth management offshoot.

Policymakers, and regulators whose need to think very carefully about the impact on clients and whether this is the result they want. If extensive look-back and remediation programs, the push for higher education, professional and ethical standards and all the rest of the compliance issues facing the industry is designed to drive advisers out and drive up costs, thereby restricting the availability, accessibility and affordability of high-quality financial advice, then that’s one thing.

But if it’s an unintended consequence then they need to rethink how they’re going about it, because what CoreData’s research appears to be pointing out runs completely counter to the stated aims of regulatory reforms.