Over 80% of advisers say the cost of including opt-in processes into their business will be more than $100 per client. More than a quarter believe this cost will exceed $250 per client.
These are the outcomes of our latest poll, based on comments made by Financial Services Minister, Bill Shorten, in last week’s release of the first tranche of the draft Future of Financial Advice (FoFA) reform legislation.
As we go to print, 56% of advisers said they believe opt-in will cost their practice between $100 and $250, while a further 26% said the cost would be north of $250. Only 6% say that opt-in will add no cost to the business.
The heightened debate on the cost of opt-in stems from these comments made by Mr Shorten:
Rice Warner have estimated the cost of opt-in to be around $11 per client. This includes set-up costs and the cost of chasing up clients who are charged on-going fees but who advisers may not be in regular contact with.
“Opt-in won’t create a significant new impost for advisers who are in regular contact with their clients…”
Many comments from advisers have focused on the reality of building an opt-in process into a business, rather than the theory, and the results of the poll indicate their views.
Over recent months, Mr Shorten’s consistent position has been that the financial services industry has not convinced him that opt-in will present a big impost on advice practices, and he has used the Rice Warner report to support his position.
For the majority who believe opt-in will add significant cost to their business, we welcome any arguments you may wish to make that support your point of view. We equally welcome comments from advisers who believe that opt-in will not add significant cost to their advice practice.
All considered comments will be forwarded to Mr Shorten’s office by 16 September deadline for written responses to the draft FoFA legislation…
Advisers have been wedged on this policy! Wedged into a debate on whether the cost is $0 versus $250. That should not be the debate. The real cost is incalculable, FOFA will lead to the complete aggregation of product and advice. Consumers and advisers of the future will be tied to product groups like never before!
Who commissioned the study that arrived at a cost of $11 for opt-in, ISN? Seems this government can’t avoid conflict of interest in this matter. The REAL cost is not a simplistic letter. It involves engaging the client over and over again, focussing on fees more than ever, the advice and strategy falls into the background. If a client wants out it is easy to do to request the payments not be made. I don’t think a government has any right to determine how and how much a person pays for a service as this is a contract between two parties on mutual agreement. I think it should be challenged via the courts. It smacks of depriving people of freedom of choice by someone who thinks they are doing them a favour. Fact is people will have no access to advice all of a sudden and could very well be in a compromised financial position because they “forgot to opt in”.
Fully agree with first two comments, Shorten wouldn’t have a clue what it costs as he has never been in business let alone an adviser or planner.
In case he didn’t know but as we all know, clients can opt in or out now as they please.
What is going on here?
Simply more unnecessary government interference and red tape without any real benefit to either consumers or advisers.
We have seen that everything they touch is a complete shambles and the financial services industry is no diffeent.
The sooner they lose government the better off we will all be.
amazing . where did rice warner get their data from? really how respected can they really be after publishing such rubbish. I do a fee schedule for clients that ask breaking down all costs . Not including my time to see the client the exercise takes around 20-25 minutes . Lets say there is another 10-15 minutes chasing up the clients who you have spoken to , 10-15 minutes getting hold of clients( You know clients are not always there when you call them) .so we are looking at best case scenario 40 minutes worse case scenario 55 minutes. At $11 i would have to report my self into the fair work ombudsman
I agree with the first comment by CFP Graduate. The debate is a farce and the legislation a nonsense.
I can understand the Government preserving pension funds by banning commissions on super which clients never had control of.
But clients have always had the ability to cease adviser fees by contacting institutions direct.
Or maybe I’m missing something…
Minister, the Opt in provision is being driven by people who believe Financial Advisers receive money from poor consumers and don’t do any work for this income such as trailing commissions. FoFA is doing away with this perceived injustice by banning commissions. However, the Opt in provision appears to have been crafted because the Consumer Group Choice and the Industry Funds movement believe that without Opt in asset fees from 1 July 2012 will become defacto trailing commissions. You are in effect saying poor consumers are going to be too stupid to check on the fees they are paying and if they are not getting value to turn off these payments going forward at any time. Therefore to stop people being “ripped off” (your view Minister) every two years we need to contact them to ask them whether they are getting value for money. There is no other legal contract in Australia that requires providers of goods and services on an ongoing basis to do this, why are you picking on Financial Advisers? Is it due to my comments above? If so come out and say it.
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