Advisers Give ‘Thumbs Down’ to FoFA

92% of advisers believe FoFA reforms will fail to deliver their intended outcomes, according to the results of our latest poll.

We asked:

Will Future of Financial Advice reforms lead to a higher proportion of consumers seeking advice from financial planners?

We received a range of comments from advisers who have overwhelmingly rejected the Government’s FoFA reform package, where opposition was mostly expressed in relation to banning risk commissions in superannuation and the introduction of client opt-in measures, which have been termed by one adviser as  “… counter-intuitive reforms.”

Most adviser responses focussed on issues surrounding the banning of super risk commissions, including what happens to clients at claim time:

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…

Group policies all round and good luck at claim time…

Another adviser summed up:

People do not decide to get financial advice based on how advisers get paid. They get advice because they have a need and if the adviser can fulfill that need, the client should then have the freedom of choice on how they pay.

On the topic of opt-in:

Having to chase clients who have forgotten to send back their “opt-in” paperwork will mean having to employ one more staff (admin costs), doing stuff that adds no value and reduces what we should be doing which is helping our clients…

However, other advisers do support a number of principles in the reforms, particularly in relation to investment commissions and advice:

Let’s formally separate the advice from the product. Charge a fee, whether it is at the product stage or not. This will achieve the government’s stated aims…

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.

While many advisers may by now have been provided with an ‘overload’ of information and opinions about the merits or otherwise of the FoFA reforms, a number of stakeholders (associations, politicians, individuals) believe it is not too late to influence the outcome of the legislation that will eventually be introduced into Parliament in the 2011 Spring sitting.

So, let us know your views and the changes you want to see that will help achieve the goal of providing financial advice to more Australian consumers…