Advisers have mixed feelings about the FoFA reforms, according to new research released by the Association of Financial Advisers (AFA).
The “Tides of Change” report looked specifically at each of the FoFA reforms proposed and found that while advisers support the introduction of a statutory fiduciary duty they are strongly opposed to the proposed annual opt-in reform.
Almost three in four advisers (71.1%) said they expected the introduction of opt-in to have a negative impact on them, while three in five (59.8%) expect it to have a negative impact on their clients.
The research found that while the reasons advisers provided for opposing the reform were many and varied, in almost all cases advisers were concerned that the reform would create more paperwork for both clients and advisers, and believed the reform was not in keeping with the long term nature of advice.
… advisers believed the opt-in reform was not in keeping with the long term nature of advice…
In contrast, fiduciary duty has broad support among the adviser community:
- 76.2% strongly support the introduction of a statutory fiduciary duty for advisers
- On average, respondents gave fiduciary duty a support rating of 7.9 out of 10 – the highest among the proposed reforms
- Almost two in five respondents believe the reform will have a positive impact on their clients (37.6%), while the majority (56.2%) foresee no impact.
In relation to the banning of commissions, most respondents (42.8%) did not support the reform. Those advisers who support the prospective ban (36.1%) cite the benefits to clients and increased transparency. However even those in favour of the ban on commissions paid on investment products remain steadfast in their opposition to an extension of the ban to risk commissions.
Commenting on the research, AFA CEO Richard Klipin said he felt the mood of advisers was largely positive. “While advisers are clearly concerned about the proposed reforms, they are also supportive of a number of initiatives and recognise the opportunities that are likely to arise from them,” Mr Klipin said.
Other findings
The research, which was conducted from August to September 2010, also investigated adviser perceptions of the role of professional associations and dealer groups, and adviser attitudes towards the future of their practices.
When asked what plans they had for their practice in the next two years, the majority of those surveyed said they had plans to grow their business (77.8%). Similarly, 47.8% said it was very unlikely that they would sell their business in the near future.
The entrepreneurial spirit is alive and well in the financial advice industry.
Interestingly, 55.7% of those surveyed said it was very unlikely that they would leave the industry in the next two years, with just 8.5% saying it was very likely they would exit.
According to CoreData/brandmanagement’s Andrew Inwood… “This reveals a healthy ‘can-do’ attitude on the part of most practice principals. The entrepreneurial spirit is alive and well in the financial advice industry.”
The survey also found that further study was a major priority for advisers with three in five advisers (62.4%) saying they are likely to undertake further study within the next two years, with one third (32.8%) very likely to do so. Among the areas of further study being considered are: accountancy, advanced financial planning qualifications, economics and business degrees, risk qualifications and SMSF courses.
Advisers were also invited to share their thoughts on industry associations and dealer groups, with 40% believing that membership of an industry association should be mandatory. Advocacy and providing advisers with a “united voice” were rated by respondents as the most important tasks professional associations should undertake for their members.
Have your say on the proposed reforms and how they will impact your business via the latest riskinfo poll.
