What do you estimate will be the cost per client to include all opt-in processes into your business?
- $100 - $249 (50%)
- $250 plus (38%)
- $1 - $99 (9%)
- No additional cost (3%)
One of the more contentious statements stemming from the release this week of the first tranche of the Future of Financial Advice draft legislation was the apparent acceptance by Financial Services Minister, Bill Shorten, that the cost of opt-in will equate to approximately $11 per client.
This observation from Mr Shorten has prompted us to ask how much you believe opt-in will cost the bottom line of your business.
Our question is:
What do you estimate will be the cost per client to include all opt-in processes into your business?
In his statement earlier this week, Mr Shorten noted a report from Rice Warner Actuaries, which it says estimates the cost of opt-in will be approximately $11 per client: “Opt-in won’t create a significant new impost for advisers who are in regular contact with their clients,” Mr Shorten said.
We note the $11 figure is qualified and includes assumptions by Rice Warner about existing regular contact between adviser and client. But Mr Shorten chose to quote this number in the release of the draft legislation. Earlier Treasury estimates put the average opt-in cost at around $100 per client, while others have said it may cost up to $250 per client.
Additional details surrounding the opt-in process have been released (click here for details), in which electronic opt-in renewal processes are available in a range of options the Government says offer significant flexibility.
In an earlier poll we ran on this question, there was overwhelming feedback that opt-in will impose a significant extra cost to the bottom line of the advice practice. Given that additional details have now been released, has your opinion changed? We are asking for your best estimate about the cost of opt-in for your practice…
Add your comment now
21 Comments
In the most obvious sense, it is not even about the cost… it is the presumed need for this paternalistic level of engagement.
We have an extensive client base and thank God it does not have retrospectivity!! However NO piece of paper, especially when it will have such onerous legal responsibilities attached can cost $11. Where are the pixie dwellers who solved this one for the Minister of Purity? Oh, I almost forgot, they are the ones he turns to when he wants an outcome to suit his cause.[Will his mates in the Industry Funds be charged with the same "best for member" responsibility]
With statutory fines starting out at $50000 I can assure you this will not be a set and forget exercise, with all licencees having to ramp up their oversiight and the Adviser capabilities to manage the threat. Once the numbers build up, as they will in the years ahead, the $100 estimate done by REAL people will prove inadequate to cover the associated costs.
My accountant has pleasure in charging me $200 on top of ASIC’s $218 each year, so I can tell them I am solvent? Its compulsory and every year, no phone call, no advice, no nothing!
Opt in remains a “stupid” plan because there exists already the option to “sack” your adviser.
This is nothing more than a cheap shot to make life more difficult. If the plan was for an Opt Out I think there would be wider acceptance. Because it would actually require the client to take an active interest in the process, rather than a passive one.
A low cost estimate of running a financial planning practice is approximately $200 per hour. $11 would therefore cover approximately 3.3 minutes of work. It takes longer than 3.3 minutes to explain to a client what they are agreeing to, let alone the paperwork involved to prepare the fee disclosure and confirmation documents. $11 ? Really? Not a hope.
its not the cost of contacting clients rather than planners having the correct contact details of all clients and the systems in place to comply with opt-in
what will planners do with so called inactive clients?
A simple change of Government is the easy solution. Shouldn’t be too far off now. Fingers crossed.
Hear, hear, Peter.
What Labor government estimate has ever come in anywhere near their originally stated one.
Why the need to ‘double-up’ with ‘opt-in’ when a client can ‘opt-out’ at any time?
Another Labor stuff up just to appease their union mates (by the way, only 25% of the working population), paving the way for the industry funds (who ‘pull the wool’ over their members eyes, rake off the top of the investment earnings and give the members what’s left as a ‘crediting rate’. Is this a fee? Bloody oath it is).
As Kenn says, What about the best interests of all super fund members.
The sooner the change of government, the better.
it is very hard to quantify except that it will add considerable expense & hassle….. it’s often hard enough to get info from clients when they NEED the original advice let alone every few years when they feel no compulsion to review! Many clients are happy to pay review fees on an ongoing basis but will not necessarily commit to annual face to face meetings. Even with the flexible choices available there will be additional time required to follow up on correspondence etc. Only an out of touch politician could put the cost of $11 per client: most of them have never even run their own business! They should look at an example of how well opt in works, look at the % of people that opt to donate their organs vs the number of people that say they would like to do it!
The Government are treating clients and advisers services as a commodity cost which is the opposite of what we do and the service we provide.
You cannot charge out what we do, as a simple hourly rate.
EG:$11 to contact client to opt in.
Clients make most of their decisions in life, based on emotion and emotion causes people to make impulsive decisions.
Our job is as a mentor, to curtail emotional outbursts and irrational decisions,which takes expertise and cannot be put in the same basket as getting Tax advise and paying a set hourly rate.
We would make a fortune in our dreams, though in reality, clients seem to forget the 10 phone calls and numerous emails made in panic or haste, for us to advise for or against a decision they made, or are about to make that may have little merit, yet took many hours of our time to go through and now in the brave new world of set fee’s, we have to fight to get the client to pay us a set rate.
The problem we fixed is ancient history and only took a minute to fix, or so they think.
Memory loss from clients for the work we did seems to be an epidemic and could be their excuse not to pay or better still, Opt out.
Currently, we do this work and take the good with the bad.
$11.00 per client? somehow I don’t think so.
How much has it already cost the industry debating this stupidity? And … they want to lower costs, do they! Who’s going to pay in the end?!!!!!!!!
The cost of opt in to be $11 per client. This coming from a government that tells us that the carbon tax has a base cost of $23 per tonne even though Treasury modelling was done on $20 per tonne and then given to the electorate hoping voters will be gullible that the cost to households will be little or leave people better of.
This coming from a government that has NO small business minister and whose policies regarding the manufacturing sector alone compells a Labor Senator Doug Cameron to refer to this governments policies on the manufacturing sector as irresponsible and dumb.
And we are supposed to believe Shortens figures for our practice per client being $11 based on “research” conducted by Shortens union buddies via the Industry Superannuation Network who had commissioned a report from Rice Warner….is their bias ? Me thinks the bias of the comments from Shorten coupled with the arrogance of ministers like Shorten and the incompetance of this government speaks far more about their lack of understanding of our industry and business that we should not ignore the fact that this government cannot manage a school canteen, let alone tell us as business owners and the public at large that they are acting for the betterment of this nation.
We should tell our clients about the effect of this governments incompetance in managing the economy and the effect this will have on matters like jobs, inflation and taxation that ourselves and our clients face. Let our clients who are the voters decide the fate of a pack of idiots that is this government.
Shorten has no idea and neither does the rest of the ministry or madam Julia ” I’m the best person for this job” Gillard
My staff have mentioned that at a $11 per client it means that they will not get paid. The issue of preparing the contract and having it signed is only one part of the cost. What will the process be for the fees to continue to come out of the product. I assume the managers and providers will require a copy of this contract and following this up with managers/providers to ensure we are paid will be more of an issue.
Majority of my clients are either pre retirement or retired. Our regular reviews are done in the clients homes which they are used to and expect. Any mail they receive always require a sit down and talk which can be up to 2 -3 hours round trip for Brisbane clients. W e do a lot of Centrelink contact for clients which also uses time. To send mail for opt in would require personal visit and time for explanation. As clients have been used to personal service the change to try and do mail contact would be a disaster. All clients happily pay service fee by deduction from their account and none have ever opted for fee for service.I am sure clients will be disappointed with proposed changes. I would say a visit to sign forms for opt in etc. would cost a minimum of $300 per client.,
Opt-in can be killed stone dead if our “friends” the life insurers & fund managers have the guts to tell Yarralumla Bill Shorten the real cost of the system changes to their mainframes so the moment the client fails to Opt-in, the money trail to the adviser self-destructs
And how those costs will be passed on to consumers !
I would like to opt-in to the coalition and opt out of labor in 2 years.
Maybe Mr Shorten should have an opt-in to decide whether the public wishes to retain the services of the Labor Government. It would be much cheaper than an election, probably less than $11 per constituent. Anybody who does not respond in 30 days is deemed to have opted out of having this Labor Government continue. The apathy of the government’s “clients” in not responding will ensure that not only does Mr Shorten see the folly of an opt-in system but the government would be opted out as well. Two birds with one stone.
The last case that I assisted with a claim where the client is suffering a terminal illness has taken me three full days work at no fee.
Before this client contracted their terminal illness they were paying me 40 cents per month.I am now obtaining an advance payment of $380,000 for them where they never even knew about their possible claim.
Prior to this, had I asked them to pay me for the service, they would not have had the money to pay as they do not have at present.
Mr Shorten, what should I charge them ?
What should they pay me for my time on setting them up for an opt in service that they cannot afford ?
Don’t worry guys, Shoten by name and Short-term by nature, he ain’t going to be around for much longer. I can just see poor old Kev 07 sitting in parliment all by himself Kev 12 (Smarter model)without a care in the world. Seriously though this is the first time in 24 years where clients are comming to my office and asking what they can do to get rid of this government, I don’t normally get involved in discussions like this but if our clients, all of them, are openly discussing this then Labour should be terrified. Be patient everyone but be careful what you wish for.
The Moscow Circus is short on clowns at present. Bill should be shooting over to Russia with the rest of the Labour clowns and form their own Troupe.
A serious comment would be offensive to most intelligent people.
Hence none made.
I was just thinking about contracts and relationships and opt-in.
If you ask a party to a contract to sign and, it so happens that that person has a bee in his or her bonnet on that day, then they would not sign. This happens even in marriages. So Party Member, would you be prepared to ask your wife to sign an opt in on a specific day on which you set now for say 2 years time ? I reckon that there would be many more marriage and contract split ups if the contractor happens to choose the wrong day. Imagine how the divorce rate would soar. I’d go a bit further to try and explain to you that procuring a client is only possible after a long term of relationship building. Opt-in does not consider the time that the adviser has put into his own education and prospecting, let alone relationship building and retention. If we do not consider what each party brings to the marriage and everything that has gone before, then one could say the marriage would not happen.
You are breaking down the contracts and relationships that people so direly need in order to be able to seek assistance to protect and build wealth. The more you say that they do not need advice or should not pay for it, the less benefit the people will have. This is proven in the amount of investment value of those who have advisers . And it is proven in the value of the benefits that the disabled, the widows and orphans receive from their insurances put in place by their advisers. Your action is increasing the tax bills of every Australian by putting so much extra burden on the Department of Social Security.
What you need is people with experience. Troups who have ground knowledge, not advice from people who have never been in the field. So many great advisers have jumped ship as they have not received the recognition they deserved, They have only had their businesses stripped by unknowledgeable and inconsiderate party members, who themselves have never offered a solution to a widow, orphan or disabled member, or unfunded retiree, other than to instruct them to go to the end of the queue.
The cost of the liability of taking on clients under the opt in regime, outweighs any cost of administering the process which adds to already high compliance costs with no real benefit to anyone. The end result will be that only the well off will receive ongoing advice. This means that clients who are mostly financially illiterate and really need advice particularly during times of need eg market downturns, when they need to claim on insurance etc. will have no one to turn to (because they are not on any ongoing service package). They will get sold products by institutions. They will not experience the value of a long term trusted relationship. These are generally “working families” who Labor say they want to look after. The reason Labor politicians cannot see the final outcome of their policies is because they have not tried to understand the real issues - they somehow think that all the advice people need is about super - basically product advice. They just need to ask institutions (industry funds, banks etc) who looks after clients when they need help the most. Definitely not employees. It is only small business financial planners who have known these clients over the years (and yes got paid a small sum of money over the years) who do the work, meet clients at their homes etc mostly without charging the clients a fee.
All this will end with the new fee based, opt in regime as these planners will no longer be able to afford to do this for people.