To what extent will the return of the Labor Government impact the future value of your advice practice?
- Significant negative impact (78%)
- Minor negative impact (12%)
- Significant positive impact (3%)
- No impact (3%)
- Not sure (3%)
- Minor positive impact (1%)
During the recent Federal election campaign, our poll revealed the vast majority of financial advisers would prefer to see the Coalition form government.
But with the return of the Labor Government finally confirmed, our poll question this week is:
To what extent will the return of the Labor Government impact the future value of your advice practice?
Given 88% of the hundreds of advisers who took part in our poll said they preferred a Coalition government, does this translate into advisers believing the value of their practice will diminish as Labor’s Future of Financial Advice (FoFA) reform proposals take effect? Or was it more a view that the value of their advice practice would have a better prospect for growth under a Coalition Government?
The banning of commissions for investment and superannuation advice is on track to be implemented from 1 July 2012. Will this have a positive, neutral or negative impact on the value of your advice practice?
There are also the other key FoFA reform and Cooper Review proposals such as clients having the ability to ‘opt in’ to future advice, the enshrinement of an adviser’s ‘fiduciary duty’ into law and the banning of all commissions from the superannuation sector.
Whatever your view, we will be sending the results of this poll, and your comments, to the Federal Treasury as part of the Government’s industry consultation process.
The following extract is a response to riskinfo from the Treasury after we provided it with your responses to our recent poll on whether payment of commissions on risk products represented a conflict of interest to the consumer:
“Thank you very much for providing us with a document capturing the views of so many stakeholders in respect to commissions and life insurance…We will be looking at this issue in greater detail next year - this information provides a good grounding in preparation for that.”
As we have previously said, now is the time to have your voice heard. Tell us what you think and we will make sure your opinions are included in the industry consultation process…
Add your comment now
36 Comments
This industry would barely exist without past Labor governments (Super Guarantee, Dividend Imputation etc). I suppose I shouldn’t be surprised that so many people hold the view that this will be a negative, but I am.
Who are you going to thank when more and more money rolls into the system courtesy of the increase in Super contrinutions? The Coallition?
Why don’t we all get together and have a “bite the hand that feeds” picnic!
This labor Government has no clue about our industry. They have a bunch of uneducated regulators (in this field) who could not sell candy to a baby.
Ask them who they get their research from and they will have forgotten those who have benefited from advice. What is the use of asking another regulator for advice - go into the trenches and get the real stories - the stories of orphans who would have been left destitute or retirees who would have spent all of their money.
What is the use of restricting advice by increasing the cost, to those who need it most ?
This Labor Government will have our tax increase to fund their errors, and the costs will be a lifetime costs that will never be recoverable. They are killing the goose population that lays the eggs ?
Overall good advisers will still thrive as they always do because they are great value for money to their clients.
I can’t let Matt Insider go without putting his comments on Super Guarantee in some perspective, in view of Labor’s cosy de facto marriage with the Industry Super Funds via their long time bedfellows the Australian Unions. Moving forward, increased Super Guarantee will advantage Industry and competetive for profit funds, but I believe will progressively move uninformed members out of the sphere of influence of Financial Planners and entrench them further into the no advice culture of the funds for whom retention of funds under management is a major objective. I’ll be very surprised if Industry Fund Advisers recommend SMSFs to their members for instance!
For advice to thrive we need a strong economy, and I’ll still back conservative politics to deliver that above the socialists whose handiwork can be seen in the USA, UK and Europe.
As an adviser it is our role to give good advice no matter who is in government and should not pre-empt what might happen. In saying this I believe the government is being negligent in advocating a cheaper - no advice superannuation structure. They are focusing on price not quality of advice. If they want the people to have a self sufficient superannuation fund at retirement they should be looking long term and not at the hiccups of a downturn in the economy and madly rush out to stop fees. Superannuation is a long term investment and requires due diligence to manage it to ensure people have a retirement fund. You get what you pay for. Treasury will need to ensure a supply of funds to supplement super funds in retirement when it is not necessary but I doubt if the average tax paying would see it that way when taxes will need to be increased to cover it. The fees/commissions in super are not the problem. It is the manipulation of information to make it a key issue when it is not. There must be good quality advice at a reasonable cost to the member and governments should not be interfering in the determination of fees nor the advice.
Matt Insider you have really demonstrated your ignorance. Anyone with half a brain is acutely aware that this government plans to abolish volume based remuneration. That being case, what does it matter if SG conts are increased to 12%, 20% or 100%? Read up on the developments before posting a comment please.
As an owner of a large Risk business, the sale of the business has always figured large in my superannuation planning. As I understand it, it is the renewal commissions that determine the value of a busiess. If we go to a fee based arrangement, surely that has a major negative impact on that sale price, and hence well laid plans for retirement. Can anyone tell me who raised this issue with regards Risk business in the first place? It wasn’t on the original agenda which mainly surrounded superannuation. One can only hope that this Labor “coalition” self destructs as soon as possible and a proper, responsible government can be returned.
Matt, I can only assume you have your head is under a rock if you are surprised about the negative attitude. The hand that feeds us? Really? You do realise that this same hand is about to remove all of the food? A Keating, Gillard is not.
Although we would all agree that an increase to SG is a bonus for all Australia’s (Which the Coalition are in favour of anyway) this little potential gain in revenue of say 3% per year will have no effect to offset the huge increase in cost the new policies are placing on 90% of small advisory firms, the reduction in clients due to increased pricing most firms will have to implement, the opening up of super advice to unqualified or limited advice union/industry funds which removes these clients form the financial planning market (To their detriment imho), onerous additional paperwork which does nothing to protect clients but only to increase the cost of advice further.
In short, small planning firms are being legislated out of existance to make room for the large banks and industry funds(unions) to take over.
Hmm surprised about the negative replies are you?
(ps the real motive behind an SG increase is to help reduce the burdon of future age pension burdon’s on the government in any event. Atleast this is one thing that we will all benefit from for a change).
In addition, the reason oxygen thieves want commissions gone is so they can stop paying standard trail to advisers without the need to reduce their bundled administration fee - pocketing the difference. Everyone is simply pursuing a vested interest here. THE CONSUMER WILL LOSE.
Replace a product entry fee (commission) with an ‘advice’ fee for the same amount and you have just cost the client an extra 10% due to GST, which very few would have any right to claim back. Replace a trail with a ’service’ fee for the same amount (although the example of most of the holier than thou advisers doing this now is to make the service fee higher than the standard trail) and the same thing happens. I have said this before and I’ll say it again. ‘there is no public outcry about fees and commissions’. It is a fabrication of the groups with vested interesr, likes the one that Matt the Insier comes from. And a question for him and Trent, how does an increase in contributions benefit an adviser if you are banned from receiving any commission (upfront or trail) under the new legislation and nor will you be able to charge an asset based fee? Will you charge more for your advice because the amount is bigger? Seems a little ‘commission’ like doesn’t it? Everyone write to the three independants and explain our plight. They may just be able to stop some of this nonesence proceeding.
Given that we have to absorb the costs of trying to get a substandard life on the books - subsidizing them with the clean cases - how will we give insurance advice to the substandard clients in future without a fee for service. They need insurance too… when you take into account loadings or exclusions they will be a disadvantaged sector of the population…. I feel, legislating or somehow ensuring that all insurers pay the same % of commission, on say Hybrid, and or Level basis (advisor choice) will remove the perception of advisors selling product instead of advising clients fairly to ensure appropriate levels of cover are in place. Ongoing, advice is needed often to ensure client has enough cover with changing needs. This “product selling” perception seems to be the problem in the govts eyes. A Fair and Level commission playing field in the industry would fix that.
In so far as super goes, in my opinion, ongoing comm on super where there is “no ongoing advice” is a farce and should not be allowed to continue. There could be a flat figure to cover administration costs from the fund and the client can pay in all cases on an annual basis for investment advice. All other professions have this system of pay as you go - why is this profession any different. Sound advice is worth paying for, those that cannot afford this can go into the default fund with their default insurance. That is how its heading - let it be - don’t try to justify 1% or so of FUM for admin only. Wouldn’t it be to the company advantage to advise those that have choices, instead of being just a clearing administration house for low value funds? 80/20 rule…. yet again. Can’t imagine a business with 1000 clients with less than $100k each being worth having, or being a good model to base a sale of the business. There is plenty of middle class clientel to go around.
Yes I fail to see how the regulators can make the job of advisers more onerous and at the same time allow industry funds to provide limited advice?? I thought advice was advice! I wonder if when the client retires and finds he could have saved thousands in tax, invested in property, invested in direct shares and utilised imputation credits to enhance his return, utilised reserves in his funds, included his spouse in the fund and so on I wonder if he can then go back and sue the fund for the poor advice he recieved? It’s a joke!!
I think it is obvious to all “thinking”advisers, that the way we do business is going to change dramatically, the clients we deal will also change and the cost of business will erode our margins. The problem is CHOICE will go out the window, enforced by the most left wing govt Australia has ever had. To the benefit of the Union controlled Industry Fund darlings! This is one of the most effective ways to eliminate competition, get rid of the majority of financial planners, which threaten their dominance. To all that voted Labor, you get what you deserve, problem is, most of you won’t have a job or a job in your chosen profession, Labor will make sure of that!!!
The industry & this government need to focus on the people that we serve which are their prospective age pensioners & disability pensioners & not loose sight that we assist all, not just the rich. By making fees compulsory we are now dealing with the rich & forgetting the rest which means the government will be paying the price in the long term with additional age & disability pensioners. Leave fees/commissions as choice so that we can deal with all & take the people who want advice out of the government system.
Hey Matt where you been living, Mars?
I just picked up a new client who had received the “Benefit of No Advice” from a wonderful Industry Fund call center get this, based overseas. That was so successful she was effectively left uninsured, due to the processes of the concerned entity. What an excellent outcome for the consumer. For now I can help this younger client and get paid by the insurer,not going to happen if I don’t get paid and there is no incentive. Communism and socialism don’t work. God help the consumer if there is no incentive for US to get up and go to work. Maybe Matt you can move to Bengladore and work for the “Industry Funds” for Food and $5 a week, you can go bite on that. I see a bright future for Matt as an employee at a industry fund or a bank. Go get em Matt!!!!!!!!!!!
Since 1993, advisers and Industry Fund Network ( IFN) have co-existed in the same broad space. But our clients and thier clients are different, and always will be. We want to talk to clients who care about their financial future, not someone who does not care, because, ” its (the 9%) not their money”. IFAs are not, and have never been, a threat to the IFN
The IFN perceived the Super Choice policy of the Howard Govt as a threat-but it never eventuated-few Members changed funds.
However,the IFN were seduced by what they saw as the success of the multi-million TV ad blitz, and decided, like all fundamentalists, to keep asking for more. Weaven & Whitely had access to Ministers.
Those fools at Storm gave them an opening, and the IFN and an ideological fellow-traveller Govt went through the opening at full throttle. An enquiry on crap advice turned into an attack on remuneration for advice on super, then on to any investment, and recently morphed into an attack on, of all things unrelated to Storm, life risk commissions, in or out of super.
How did that last step occur. Easy, our friends the life offices ( and the banks) think there is an advantage of further control over distribution ie tied advisers. So they went softly on the Govt, and now the cat is out of the bag, and has had at least one litter of kittens.
The life offices and adviser organizations have to impress on Govt that there is a big difference in advising on already-accumulated investment and selling and servicing life risk. They have to work out who they represent.
The Govt must be made aware of the threat to the strength of the No 1 Statutory Funds if life advisers are not to be paid for putting fresh young medically assessed life risk business on the books, nor for keeping it on the books.
If the 65% of indivual life risk in No 1 Funds which is currently medically assessed reduces past 50%, the days of cheaper Group risk for IFN is over. Its about identifying and then managing risk, OVER THE LONG TERM,thats the challenge. Life insurance lasts much longer than any investment.
We just dont know enough now to know what are the threats to advisers businesses, particularly on the life risk issue. Will renewal commission be threatned because clients can’t be bothered ” opting in” each year, if that is indeed a proposal for risk. On that subject, the risk client has always had the option of ” opting out ” from an adviser-its known as an adviser transfer request, or just a cancellation request.
Has anyone heard from thier favourite life office?
What are the dealers doing for thier clip on our commissions?
We will have to await futher developments, but this industry, and in particular the life risk industry, had better start talking to the 2-3 Amigos. I did my bit, emailing all 3 in the 3 days after the election. What are the rest of you doing?
Advisers who live in the Electorates of Kennedy, Lyne, New England, Denison and Melbourne better get on the phone NOW.
Commissions or fees are simply a mechanism to get paid for the time, effort and value we put into assisting our client’s manage their financial affairs. We all know where we add value as advisers; I just wished we could run a smear campaign like we have seen from the industry super funds. I wonder if the campaign costs were funded directly from the pockets of the Union, whoops Industry Fund bosses? Maybe we advisers could pool our recourses and create a fund to run our own campaign to inform the public of the costs associated with not getting advice. Assuming there is going to be a ban on commissions; we need to get our heads out of the sand and change our mind-set first, and then start to transition our respective businesses to a fee for service model (or hybrid). When working on fee for service, you will be able to advise industry fund members on the benefits or salary sacrifice, Government co-contribution, TTR strategies, etc and charge your client a fee for this value-add-advice, i.e. you sell the advice and let the Industry Fund pick-up the costs associated with handling all the paperwork and administration of your advice. I just wonder whether the industry funds business model and backward systems will sustain this increased complexity and demand??
Very few advisers would argue against the need to move away from a commission based remuneration. However, the heavy handed approach that the labour/Green alliance espouses smacks of a Government that is in bed with David Whitley and Garry Weaven. The free market is the best judge of fees and it is remarkably efficient at voting with its feet. Any fool can pour money into an Industry Fund for 35 years and never look at it, but ask investors what’s really important and they won’t say fees, they’re more likely to say good quality advice which helps them to navigate through life’s financial minefield. So let’s turn the argument around and pose this question, who measures the quality of the advice and service offered by Industry Funds (if any) ??? And who said financial advisers work exclusively in the very narrow field of superannuation ? Last time I looked I helped clients with Centrelink, Life Insurance, direct shares - listed investments, the benefits of imputation, advice on gearing and how to transition to retirement,the benefits of estate planning, the use of trusts, etc, etc.
One thing we have seen about the Labour Government and the faceless men who control it,is a patent fear of losing their positions of power.eg:ask Kevin Rudd if he trusts his own party and all those he helped get to power.
The great thing about the election result is the very tenuous position this Government is in and how quickly they can be out, if the Independants lose faith in Labour.
So guys,we do not need to spend tens of millions of Dollars in advertising (Mining Industry) to discredit an inept Government,we just need to convince 3 people who hold the balance of power in this country,to threaten a NO CONFIDENCE MOTION and watch the Government backflip quicker than the Industry Super Funds credibility.
From what i have seen, the Independants appear honest and have a empathy with people who have been ignored, or overidden by Lobby groups funded by self interest groups like the Unions.
If we want our voice to be heard,don’t bother with concise,intelligent useful debate and discussion,these guys don’t care and will not listen anyway. All we need to do is threaten their cosy little arrangements by directing our case to 3 people in a clear,easy to understand format, that will spell out the real consequences of ignorant,self serving regulation and watch the resulting change of heart.
Why does the government hate us?
Our planning costs them - millons in lost taxes and millons in increased pensions!
They are the masters of spin and have turned the debate against us, at the moment.
Keep spreading the word of the value we provide, prove it to our clients and they will support us. We truly can forget the rest.
If the government is going to facilitate the use of industry funds by making them compulsory through EBA’s they had better make damn well sure there is no misuse of funds. Large Superannuation in the hands of the unscruplous has the potential to create a whole raft of Ponzi Schemes if not watched closely.
change creates opportunity so risk businesses are worth a lot more and there will be clients searching for engagement and value from advisers who offer fee for service-people still need advice and service
Bill is on the ball but don’t stop at the three fools.If you are in a marginal Labor seat make an appointment with your member and point out the craziness of this strategy, the fact that the customers don’t want to change and ask him/her to state their position on the proposed legislation. Then whatever the answer make it clear that if it goes ahead and that person does not vote against it - abstaining is not good enough -you will be campaigning among other advisers, all 18,000 of them and your and their clients, surely a total exceeding 3 million voters to vote against the member at the next election. 3 million votes will change a Government in such a massive landslide that they will be in the wilderness for decades.
The labour Government are totally biased towards the anti every thing decent union movement and the unions control and protect the very sub standard industry funds. A real threat to main stream Australians whom are being bullied in a one sided government endorced promotion away from a very responsible fair and self elected advice system that provides all facets of the financial planning to Australians wanting this advice. This Client elected process is about to be destroyed by a biased dangerous union dominated alternative.
Wake up the alternative is crap advice from union backed bullies.
The new minister for super is an ex director of industry funds.
Industry funds have been trying to wreck the reputation of advisors with blatantly misleading advertising.
What chance of a fair deal from the new minister?
Not too worried here - labor govt won’t last 3 years. We’ll have another election before long and out they go!
keeping it simple and regarding Mats comment #1 yes it was labour that bought in these but is it not there intention for a one super and no fee structure. would this mean they are taking it all away. there response to the storm saga is not effective and increases the costs for our clients at all levels. lets talk about fees. mostly the highest fees comming from my clients funds are taxes such as contribution tax and stamp duty’s. we are targeted but there taxs remain. for the new member with the small acoount protection, sadly there is no protection from gov fees here, so whilst real costs are incured by prividers, only the gov can reap the reward
Macca - totally agree with your comments. You should send this in to newspapers to see if they’ll publish them more widely. Sadly the FPA seems to be doing nothing about fighting all this industry fund nonsense.
My greateest concern is the opt in clause. People by nature tend not to act, and having to opt in will ensure two things - the impoverishment of financial advice firms with some going under becasue people don’t bother to opt in, and the impoverishment of clients who will not receive the advice they need in a timely manner
What can we expect from a Government, whose members can access their super well before age 55 themselves.
While we are having this discussion, can ANYONE explain why superannuation contributions should stop at age 75? I thought we were trying to persuade people to stay in the workforce longer? Just another example of Government bungling by not understanding needs.
Fee for Service is arguably morally desirable and ethically eminate. Unfortunately, for the majority of practices, it is practically, a recipe for lower valued businesses. Additionally, it mostly impacts on those who need advice most. For Nick Sherry to say they don’t need advice is hypocritical IMO.
And why is it that Q-Super tells me and their Defined Benefit Members that there are NO FEES on their Defined Benefit Accounts! How do they get away with it?
The foreseeable situation is that the large financial institutes’ market share will increase as they will be able to provide low-cost or “free” advice subsidized by the product and delivered by their salaried “superannuation specialists”.
Great idea to target the “independents”. Can somebody publish the email addresses of these gentlemen
Commissions are simply a percentage fee for which the adviser is also prepared to do the work. But in reality, a commission should be commensurate with the amount of work which is done in preparing the clients business for submission. After that initial payment, future fees should be for service provided. This government has the hidden henchmen who will certainly cut a swathe through this industry. If you don’t diversify now into a unique and worthwhile differentiated service offering, then you may as well sell up for the measly pittance your business may now be worth.
Would you buy it?
Why not make it compulsory for all adviser to give their client a choice whether to pay fee for service or commission and have the client sign a form stating how they wish to make payment and understand the charges for both fee for service and commission?
The FoFA proposals will decimate the financial planning industry. The most destructive reform will be the annual opt in clause. I am very concerned about the opt in proposal and I am convinced it will be impossible to survive under this draconian requirement. To give you an idea I recently left a dealer group and moved to another. The original dealer group made me send an election letter to all of my clients asking them if they wanted to go with me or stay with the dealer and have another adviser appointed. If the client did not send the letter back the client would not be transferred. Trying to get the election letters back was a massive task and it consumed huge amounts of my time and cost a lot of money in phone calls and postage etc. You see most people are busy and do not act on letters received in the mail. It takes a personal visit or at least two phone calls to make them act. It was a difficult and tiresome task, Clients do not like being harassed even though I have a good relationship with my clients.
Under the FoFA reform it is my understanding that the annual opt in letter will be sent from the super fund/fund manager or insurance company to the client. The letter will state how much the adviser is paid and inform the client that if they want their adviser to continue to be paid that they need to sign the letter and send it back. This draconian requirement is going to create a huge amount of additional administration expense for the adviser because the majority of people will not send this letter back. If the government introduces this opt in requirement I believe the extra administration burden will make the cost of providing advice so expensive that it will be impossible to work with Mum & Dad clients. We will have to charge prohibitive large upfront fees to provide the advice because we will not be able to amortise the initial cost over the following say three years via an ongoing income. In my view the only advisers that will survive will be those that have a high net worth client base.
At this stage it appears that commissions are going to be allowed for life insurance. However, if the opt in is applied to Life Insurance renewals then the risk adviser will not survive. Most people do not want to talk about death and disability every year. They will simply cut the renewal off at the annual opt in. Without the stable renewal income advisers would find it impossible to meet business expenses such as staff wages. Trying to survive on upfront commissions only would be difficult because you never know when your next sale will happen plus it can take a long time to get the underwriting process completed. Claw backs would be the final nail in the coffin.
I would like to know where the adviser’s liability ends. If the client doesn’t opt in does the client then assume total responsibility or is the adviser still on the hook.
Let’s hope that the Labour government collapses sooner rather than later.
As a risk adviser I can only see a negative outcome for fee-based remuneration for life risk insurance, particularly life insurance.
People will simply not be prepared to pay premiums + fees when they generally avoid contact with advisers anyway. This is true especially if they see that their premium is such-and-such a figure, then another $500 or whatever for an adviser fee.
I can only see that this will add to the already chronic underinsurance problem in our country