Advisers have overwhelmingly agreed that the introduction of a client opt-in arrangement will lead to a significant additional cost to their business.
Responding to our latest survey, 96% of advisers have said they believe a two-year opt-in requirement will impose an additional cost to their business, with 89% saying this additional cost will be ‘significant’.
This strong response follows comments made recently by Financial Services Minister, Bill Shorten, that he is not convinced a client opt-in process every two years will have a significant impact on the cost of running an advice business.
But advisers disagree. A number have responded that it is hard enough to get any paperwork back from their clients without having also to chase them to complete, sign and return an opt-in form every two years.
Other advisers have questioned how opt-in would work for those clients that are serviced under corporate and group advice schemes, while others have said this task will be even more difficult to complete for advisers who provide services in regional and rural areas.
The broad and consistent message is that the time and effort it will take to ensure opt-in arrangements are properly managed, with associated follow-up, administration and monitoring systems in place, will come at a substantial cost to the business.
But not all advisers agree about the potential financial burden of opt-in. This comment was made by a risk specialist adviser:
The more planners complain about how this change will cost them so much, the more obvious it is to everyone else that their businesses [are] 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.
Mr Shorten has indicated that the draft Future of Financial Advice legislation containing the opt-in regulations will be released in August. He has also noted that there are two key areas where he is still considering industry views: the banning of risk commissions in superannuation and the rules governing opt-in.
Our poll remains open for you to have your say, during the final weeks before the legislation becomes locked in…
The comment from the risk adviser specialist can not be left unchallenged. As a risk specialist that includes a team of three advisers, a claims manager, a client service manager,new business suspense manager,two staff to write plans, and a staff member to conduct reviews i think we have the servicing side well covered. I have costed the time to include managing our clients for an opt in situation and know that i will have to find another $ 50000 in the budget
If Shorten and the rest of his left wing union mates could put the energy that they have into this FOfA rubbish into something really worthwhile, what a wonderful place Australia could become. By the way, I am not a financial planner or adviser
At the FoFA presentation in Adelaide (1/3/11) the Treasury representatives were asked “Do you personally utilize the services of a Financial Adviser”? The response was “we do not have enough money to warrant using an adviser”. If Mr Shortens advisers have little idea of what we actually do, the minister is unlikely to empathize with our plight.
It makes NO sense for risk advice to a Superannuation Fund member ,to be at NO COST .Ownership of a risk policy ,should NOT determine the payment of advice for the product.Life cover in Super gives members dependants the option of maintaining the same lifestyle ,in the event of the members death.
We all know that Bilkl Shorten has no idea what a financial planner does or doesn’t do he simply asks the industry super and his union mates they know EVERYTHING!! and they don’t charge fees!!?? I have said this before – $5million of lost super who lost it? I doubt that an adviser being paid for it didn’t chase it up. The statement by Lance above is correct the FOFA claims that it will make it possible for ALL to utilise the services of an FP! What a lot of rot!!
I thought I was in the field of Financial Advice not Politics. Seems as though there is no way of keeping them seperate these days.
Whilst FSR was costly to many businesses I beleive most seen the benefits of strenghting the industry through tightened legislation. FoFA displays none of those benefits and simply appears a political move from the Labor government to ensure their union mates can continue to make a killer of a profit off their (Union) Industry Funds.
Given the pricing of financial planning businesses currently for sale has been dipping further and further as more of this rediculous legilslation is disclosed, regardless of what Mr Shorten would like to dribble on about it is obvious the perception of purchasers is that the client bases will hold less value going forward, why would that be Mr Shorten?
There will always be the odd planner who claims this won’t effect his business (Usually because they are in a more niche market and not offering Holistic Advice) who can see some competitive advantage created against the mainstream firms.
Seems as that this all goes around in circles as it’s the niche government and union players pushing this legislation.
I would complain more, but hey I could have always made a worst decision and become a cattle grower instead of a Financial Planner. Econimics is certainly not the Labor Parties strong point, but hey if Mr Shorten says it’s so, who am I to argue?
Should Mr Shorten introduce the banning of Risk commission within Super. How will the industry funds survive. Surely that would mean Mr Shorten will also have to ban the commissions payable to industry funds from the insurance manufacturers. Some industry funds call these payments, commission, others call them premium splitting. Call them what you like but ultimately it is a commission. Therefore these proposed changes will also need to apply to the industry funds surely Mr Shorten. It is only fair that as an industry as a whole, that everyone is treated the same.
I started life as a tech boffin with one of the life companies. One day I was holding forth to a group of agents when one of them (who happened to be the biggest writer) shouted “why don’t you get out there and get some sun on your head”.
So I did.
My advice to Bill Shorter and the consumer lobby is to do the same thing. The reality is not the story you have been fed by inquiries and Industry Fund heavyweights. Vested interests are running this show.
I am waiting to see some initiatives that will help to prevent another Storm. I am waiting to see better policing by ASIC. I want to get the shonky operators out of our industry. I want to see the Industry Funds wasting members money on stupid advertising that denigrates the financial planning industry.
Proposing an opt-in policy will mean that the advisers will have to pass the additional costs onto clients already tightening family budget.
Why do we need an opt-in option when there is currently an opt-out, and a client moves to another adviser because they are not happy with the service, advice, management of their affairs.
The process to introduce a life, TPD, Trauma or Income Protection policy is long. Meet with the client, complete a 25-30 page questionnaire to understand their situation. Review the existing super, investment, or insurance policies. Do the research and quotes to determine the company and product. Construct the statement of advice, this can take up to 1 day to tailor it to the prospect. Have another meeting to present the advice and recommendations. The client may not even proceed. If they do decide to apply to a life company, the 35-40 pg apication needs to be completed, blood tests, medicals booked, follow up Dr’s asking for medical reports to be done, follow up the prospect or the accountant for the tax returns, business balance sheets, liaise with the underwriter assessing the application, facilitate the process to get the policy in place, cancel the existing policies.
A long, challenging, uncertain process.
Not everyone is healthy. Lots of people are declined cover due to pre-existing medical conditions, abnormal blood or urine tests, being overweight.
It’s also difficult to convince people to pay premiums EVERY YEAR for an event that may not happen (illness, injury) or (death) occur post 60yrs of age.
If the commission paid by the insurer (not the government) is banned, imagine also charging a fee to the prospect for all the abovementioned services.
The Australian public will not be able to afford paying premiums and an adviser fee in addition to the other family annual expenses.
Applying for insurance inside of a retail super fund or being owned by a SMSF, does not mean the client is exempt for the above medical or financial underwriting assessment. Automatic insurance is only given inside of an employer super fund (up to a small benefit amount) or a company group policy.
Comments are closed.