Advisers have questioned whether the implementation of Future of Financial Advice (FoFA) reforms will increase the number of Australians who will access advice from financial planners.
Our latest poll question asks:
Will Future of Financial Advice reforms lead to a higher proportion of consumers seeking advice from financial planners?
The entire purpose of the FoFA reforms, according to Financial Services Minister, Bill Shorten, is to “… focus on improving the quality of financial advice and expanding the availability of more affordable forms of advice.”
But will this aim be achieved? Opinions appear to be divided.
Previous studies have revealed approximately one in five Australians currently access financial planning advice from advisers. This statistic has been regularly invoked by Mr Shorten, by Treasury officials, industry groups, dealer groups and individual advisers. It is a reference point or starting point, on which all well-intended parties are seeking to improve.
In releasing an information pack on the final FoFA reform recommendations, Mr Shorten also affirmed his belief that “There is little doubt that those who access quality financial advice are better off than those who do not.”
The three key FoFA reforms highlighted by Mr Shorten are:
- A ban on conflicted remuneration structures, including commissions and volume payments
- A requirement for advisers to obtain client agreement to ongoing advice fees every two years (opt-in)
- The expansion of limited advice
… these reforms will genuinely enhance the confidence that consumers have in financial advice
The Minister said he is optimistic these reforms will genuinely enhance the confidence that consumers have in financial advice.
Do you agree?
On one side of the argument is the contention that expanded intra fund advice and the introduction of scaled advice services will have a positive impact on the ability for low to middle income earners to access planning advice suitable to their needs, protected by a new ‘Best Interest’ statute and the requirement they opt-in to ongoing advice every two years.
The alternative point of view argues the intended reforms will lead to a number of ramifications that include:
- Less life insurance solutions being put in place for consumers
- Less investment advice being provided that was previously subsidised by risk commissions in superannuation
- Less advisers operating in both the life insurance and investment advice sectors
- Fewer consumers being prepared to pay a fee to receive insurance and investment advice
- An overall increase in the cost of advice for dealers and advice practices, inevitably passed on to consumers
Let us know your (considered) views about any or all elements of this FoFA debate. Share your views with your fellow advisers…
The banning of trailing commissions and volume kick backs from investment platforms is the right and a necessary step to improving the quality of service offered by advisers. It is also necessary to weed out all the old school advisers who for years have grown rich off trailing commissions without offering any real service throughout the years. Fee for advise investment advise is a welcome change. I feel sick and embarrassed when I find clients who are paying 1% ongoing trails to an adviser they haven’t heard of from years. Go back to your Toorak mansions bought off the sweat of mums and dads backs and let the advisers who care about their clients bring this industry some credibility.
If you provide an actual service people will be happy to pay for it.
But the banning of insurance commissions????? Are you for real Bill (union kick back) Shorten. Who is going to spend hours dealing with underwriters & doctors getting cases approved. Who is going to spend hours making sure claims are paid and received in the most tax effective way. No one unless the client pays and what regular mum and dad is going to want to have to pay the $1,000 plus implementation fee we will be forced to charge plus the monthly insurance premium and then a service fee for ongoing policy service and claims handling.
These changes will signal the end of proper risk advice. Group policies all round and good luck at claim time Mr customer when your insurance policy hasn’t been underwritten. Have fun dealing with the industry fund claim department and make sure you have some spare time to spend in court at $300 per hour with your lawyer.
Politicians making rules without any real industry experience or a narrow vision (supported by union fat cats). It will continue to happen and just like the insulation scheme and the multitude other short sighted and unresearched policies will end up hurting the Australian people.
Look what happened in the UK.
Get ready for an increase in taxes required to fund our welfare system which will be forced to support all the families who couldn’t afford the extra $1,000 for an Income Protection policy or just got the basic group policy offered in superannuation.
And Bill, you should probably apologise in advance to all the mums who get a lump sum insurance payout of $120k when their husband is seriously injured or dies to pay off their $400,000 mortgage and put their 3 kids through school. They will be ok, the welfare payments of $400 per week will keep them above the poverty line im sure.
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