It noted that changes would inevitably result in clients who were previously defined as wholesale being reclassified as retail.

“These impacts would not be uniform across the financial services industry, with some businesses and some clients being much more affected than others,” the SAFAA said.

“The financial advice sector has been subject to ongoing significant regulatory reform over a number of years. If the definitions are changed, consideration needs to be given to the impact on some businesses which have already moved away from advice to retail clients, as they could become unviable as the pool of potential clients shrinks,” the SAFAA said.

“This in turn may exacerbate the decline in availability and affordability of financial advice.”

The association admitted that “the rationale for changing the test is not clear”.

“Licensees have aligned their business model to the current regulatory framework, including the wholesale client definitions. Advisers who have adopted a wholesale client-only business model are not required to have satisfied the educational and exam requirements that allows them to provide advice to retail clients,” the SAFAA continued.

“They would therefore find themselves treated as new entrants, subject not only to the education and exam requirements but also the professional year requirements and without a livelihood.”

Finally, the association stressed the impact on clients at a time when adviser numbers are rapidly shrinking.

“Changes to the test that re-classify clients may result in them losing access to their adviser of choice or force them to sell down their holdings,” the SAFAA said.

“Any change would disadvantage a significant cohort of Australian investors who have not been consulted on their views of whether such a change is welcomed by them.”