To what extent will a two-year client opt-in process impose a financial burden on your advice practice?
- Significant extra cost to business (86%)
- Minor additional business cost (10%)
- No additional business cost (5%)
- Not sure (0%)
Financial Services Minister Bill Shorten has told advisers this week he is not convinced that a client opt-in process every two years will have a significant impact on the cost of running an advice business.
We would like your opinion on this issue, where we are asking:
To what extent will a two-year client opt-in process impose a financial burden on your advice practice?
A recent riskinfo poll addressed the question of whether opt-in measures themselves would reduce the cost of advice to consumers, but this poll addresses the cost of opt-in to the practice.
In speaking to advisers at an AFA function this week, Mr Shorten said that in all the discussions he has had with industry representative groups and individual advisers he has not been swayed by their argument that the administrative and associated financial costs of implementing and maintaining a two-year opt-in process will severely impact the profitability of advice businesses. He said he has listened to concerns that have been raised and has compromised by extending the opt-in requirement out from one to two years.
Mr Shorten said he is taking a pragmatic approach to opt-in and is “… keen to continue a close dialogue with industry to ensure that to the greatest extent possible, opt-in can fit in with the existing advice process and that the compliance regime is not heavy-handed.”
He also told media that some advisers had approached him after his speech, telling him they could ‘live’ witha two-year opt-in process.
Is this the case with your own practice? Do you accept Minister Shorten’s contention that opt-in requirements will pose no serious threat to business profitability? Or do you hold that opt-in measures will indeed be found to have a significant cost impact on your bottom line?
Mr Shorten has indicated he continues to listen to the industry and we encourage you to offer your constructive comments on this issue, where it is not too late for your voice to be heard…
Add your comment now
23 Comments
Minister Shorten says that if advisers meet / contact their clients every two years, it should not be a big issue to get them to sign a piece of paper. However someone needs to explain to the Minister that the issue here is not just getting the piece of paper signed and returned to us. It is also chasing up people who have forgotten to sign the form though they have indicated they want the ongoing service, collating the list of people who do not want to opt in, reporting these people to the provider, updating systems so we do not continue to look after people who are not paying us - in other words doing a lot of useless admin tasks. There is also the additional cost to the licensee to monitor all this and to the providers who have to stop charging clients if they don’t receive the form. We may also have to check that providers don’t stop paying us for clients for whom we sent forms into the provider where they did not update their system and the mindless tasks go on and on for no benefit to anyone.
Once clients pay by fees only from 2012 and they see the fees being withdrawn in every super fund statement (get the providers to send statements quarterly to keep clients informed of fees), surely clients are not that dumb to keep paying fees for services they do not receive (the argument for opt in is that consumers will keep paying for services they do not receive). And consumers have advertisements every day and night reminding them of how bad financial advisers are, so why have all this rigmarole? Surely someone will see commonsense?
Do Mr Shorten and any of the people advising him know how time consuming it can be to chase up busy people and get them to come in or even sign a doc and post it back. There will always be a percentage who fall through the cracks- these will be precisely the ones we won’t get paid to chase.
So the faceless, nameless advisers who approached Mr. Shorten to tell him that “opt-in” will not add any financial burden, will remain faceless and nameless. This is the method by which the proposed legislation has made it this far…..”nanny state” law!
Yes OTF, common sense. Maybe these ministers should go and look in their ‘back room’ offices and see how the real world copes with over compliance and administration.
I note that Mr Shorten & his colleagues have us opt-in every 3 years for their services. Sometimes I wish it wasn’t 3 years…..or instead that we had a better opt-out option. Seriously though, all admin tasks come at a cost - pure & simple. Clearly, it will vary upon the type of practice. In some practices the cost will be large. In all pratices there will be some cost. Ultimately, whatever the cost of extra admin actually is, it is likely to be passed on to consumers. Clients being charged fees (both now & post 1/7/2012) can always opt-out if they feel they are not getting value for money. Simple. So I don’t see the need for the opt-in rule at all. However, if I’m forced to do opt-in admin, perhaps I should show an additional item on my clients bill from 1/7/2012 to cover the extra cost. Maybe a good name for that item could be the Shorten Surcharge, although I’m open to better suggestions if anyone has a better name for it.
The Government doesn’t seem to understand that administration costs money. We can’t and won’t just create a few more thousand Public Servants to get jobs done. That is why our economy is in turmoil.
The more planners complain about how this change will cost them so much, the more obvious it is to everyone else that their businesses not setup to service clients from whom they are getting paid. This is exactly what the changes are aiming to fix.
If anything, this is justifying the government’s decision to introduce opt-in.
Dear Bill
Please come into my office and I will show you how one works. Obviously you are taking to industry funds, and large dealer groups who have no idea of reality in the field and what it takes to run a small business.
We turn over $600k pa and believe Opt In will cost us about $100k in lost fees and extra administration costs.
Being from a union background and noting his bias towards industry funds and his union mates, it is not surprising that Mr Shorten would have such a skewed view. This is a blatant attack also on small business in that with rising costs faced by consumers and another layer of legilsation in our industry, demand will decrease for services of a small business be this in our industry or retail. These costs will be passed on to clients or the profitability of a business will be reduced forcing many to close as they will not be viable. Shorten and his crew just do not get it. Is this the aim of this incompetant anti business government ? The long term effects of interfering with our industry is that by doing so, fewer people will be able to afford advice. Treasury estimates on the cost to a practice has this at around $100,000. For Shorten to have the view that this will not be an issue to us as advisers demonstrates that he does not know what he is talking about or that he does not care as long as his union mates in industry funds are covered. The sooner this anti business mob of fools are gone the better of this country will be.
risky obviously is the only planner in the country who does not realise that a client can opt out now just by making a phonecall or writing a letter,so why do we have to have a law to demand that a client MUST re-sign
So Mr Shorten tell me how a practice like mine that has approximately 5000+ corporate super members - how does it work?. Do I have to get each an every member to opt-in every two years (and how many extra staff do I need for that?)or does the ‘opt-in’ only require the employer as ‘the client’ to opt-in. I can tell you if I have to write to 5000 individuals it is an impossible task and sheer inertia will result in failure to opt-in in a majority of cases. So when I run my next seminar at the employer’s workplace do I stand there with a printout of who is and isn’t allowed into the seminar. Do I get the employer to exit the member out of the corporate fund (and increase their costs) because they no longer pay the fee? You’d like that and have them displaced into an industry fund I’m sure. I cannot comprehend how you simply don’t know how unworkable that is for corproate super. The industry super funds jingle….’from little things big things grow’ = union power and influence on the Labor government squeezing out small business in my opinion.
Treasury estimates of “$100,000 cost to planners Business” is putting a simple dollar cost to a much bigger problem.
The financial implications and ramifications will spread much further than an extra administration burden.
Thousands of lives will be affected and the pain will not be felt by advisers, as we will take appropiate action to keep our Businesses afloat.
The pain will be felt by the thousands of employee’s who work for advisers who will see their salaries curtailed or their jobs lost, due to the reduced capacity of advisers to service and look after “all” the clients, big and small.
The $50 a year client is not and never will be profitable, however that client has a door open to get advice, which will slam shut if the ‘opt in’ provision is enforced.
Bill Shorten is kidding himself if he thinks advisers are making vast profits from clients who generate these insignificant revenues. Anything less than $500p.a generates a loss, not a profit.
The cost to run a Financial Planning Business is rising and with the never ending Government changes and compliance regime growing at an alarming rate, those costs are set to keep rising, while revenues are being attacked.
Apart from Advisers and the thousands of employee’s whose liviehoods are under threat, the biggest threat is to the very people these changes are meant to protect, Australian citizens and Tax payers.
It has been said before, but Australians are reactive, rather then pro-active.
The upside to a laid back, reactive attitude, is that these people can sail through life with little “thinking and planning” to disturb their way of life.
The downside to reactive clients, is they tend to wait until the s–t hits the fan, then they do something.
These clients are slow to respond when it requires them to fill in forms and unless the adviser is sitting with them, most Australians will dawdle and find other more important things to do (Like watch television or plan what to cook tonight). These clients are a pain in the backside and actually make up a huge percentage of an advisers client base.
However, we understand that what seems important to us, is not that important to our clients, so we live with client apathy and try to do the best we can for our clients, based on constant follow up and chasing clients in the hope they will spend a small portion of their day, filling in and sending back important documents.
For most of these clients, forgetting to opt in, will mean they will be compulsorarily ‘opted out’.
Bill Shorten and his cronies are all knowing and have made this decision for millions of Australians, without asking them, if they would prefer to stay or go.
Try re-financing an existing business loan that comes up for renewal/review. The Banks have already downgraded our Practice values & increased our interest rate due to “extra business risk inherent….” in anticipation of FOFA. That’s called a capital loss & increased expenditure Mr Shorten.
My biggest issue with opt-in policy is that it clearly flags the Govt’s lack of support for financial planning. It’s now common knowledge that you can promote/support behaviours through an “opt-out” process. Imposing an opt-in process does the exact opposite of promoting/supporting. I can agree on a once off opt-in (if necessary) but thereafter the ability to opt-out is more than sufficient in a fee for service future.
Our business is ready to comply right now and OptIn will not be an issue as we will add one extra document to their annual review for signing.
We will NOT be increasing our fees as the costs are negligible.
Their fear of OptIn only highlights the very reason for introducing this new legislation.
I disagree with William’s comments, we are already a fee for advice and service practice and know how difficult it is to get clients in or to get to see clients on their aloted review date. We have had to impliment a process where if clients do not or will not make the time then the review is sent out but we still have to try to get to see the client. Think about this, if the client renews each year at the same time/date that is fine, the problem is, hardly anyone does because life gets in the way, we found that we were providing advice for an annual service but over an 18 month period thus the client was in effect receiving 6 mths of service for free. This of course was stopped and a few clients received double invoices which they paid after we had explained why.
Would Bill be happy for me to send him the additional invoices so we can genuinly keep the cost of financial advice down for all clients, which I thought was the aim of this? Or does he what us to start billing just like the Legal profession, I’m quite prepared to do this, stamps, paper, phone calls, emails etc. etc?
” Opt in ” is not just a letter seeking approval every two years( or is it reappointment every year with a new FSG and Client Engagement Letter ?) BUT it really requires adviser communication every year.
Based on the Ministers Press release and supporting documentation, “client approval” is indeed sought EVERY TWO YEARS. But it also says that, in the “alternate ” year, the adviser has to tell the client, by communication of some sort, what fees were received from the insurer/fund manager and what services were provided by the adviser. And risk is not specifically excluded, so on ASICs interpretation, it these rules must apply to RISK as well as investment
It is a JOKE!!!!!!!!!!!!
Bill Shorten is taking a hard line as he sees himself as the next Labor Prime Minister. I feel the same as someone who quoted in a recent newspaper article, “I wouldn’t even buy a car off Bill Shorten”!!
Carbon tax Mining Tax Livestock …. FOFA… the list goes on
Lets face facts that this is the most incompetant government this country has ever seen. Their agenda is simple. Destroy small business, increase taxes increase inflation smash the retail industry manufacturing travel the education industry so that future generations remain under the thumb of government. In short this pack of useless cretins need to be removed from office along with the greens. This is a shameful attack on a diverse range of industry from a bunch anti business anti decency fools who react without thought and with no vision
Well said Rick. Do not forget the insulation debacle and the BER fiasco. Watch with interest as well as the NBN budget blows out. Make no mistake. This government is dangerous. Look at the recent comments from a smirking Bob Brown regarding the coal industry….It is time this government was removed from office.
Hear hear Rick and David. There are now calls to have the governor general to step in as we are effectively being ruled by a govt that has no mandate and is controlled by a minority that a few left wing activists voted for.
In spite of earlier comments regarding corporate schemes, i think there could be an argument for those schemes only that there be some sort of opt in. I have had clients who pay 4% on every single contribution including SG who never see a planner and the client can’t even sign the policy over to another planner who will service them…..
Opt in will provide significant costs to my business and managing clients and may provide a major conflict of interest. I have a fiduciary duty to my clients and should one of my many mobile clients not provide authorization on time or at all… because they are basically tardy….as their adviser am I expected to continue to manage their affairs not being remunerated ?? Can I just drop them and say ’sorry mate you’re on your own’…I don’t think so, this highlights a dysfunctional policy which may create serious conflict.