Financial planning's biggest threat

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Major issues have come to light for the financial planning profession this week.

Grandfathering provisions set out in FoFA legislation have put a halt on recruitment throughout the industry. Licensees, such as Synchron in WA, have had to stop taking on advisers, while the legislation is clarified regarding the rules.

“I can’t see this standing the test of time,” says Synchron director Don Trapnell. “But in the meantime… I have six applications to be an authorised representative of Synchron, on hold.

“We have a duty of care. We’ve had to say to current applications, ‘if you’ve resigned from your current licensee, withdraw your resignation for the time being’.”

Trapnell says that he is not the only one to put recruiting on hold, with a couple of other major dealer groups also reportedly taking a pause.

“It’s a serious issue. It’s as big an issue as there possibly can be. Now, is this a product of bad legislation being forced through quickly without proper consultation or review processes? Maybe. Or maybe it is an intended consequence. We don’t know which.”

FPA general manager of Policy and Conduct, Dante de Gori says that Treasury is aware of the issue and concerned about the impacts that it will have from a market competition perspective.

“There are people in the marketplace today, who want to buy businesses and sell business, there are advisers that want to change licensee or indeed go and get their own license. These things don’t stop and there’s a little bit of uncertainty as a result at the moment, so Treasury do need to work quickly on a solution to provide clarity.”

De Gori says that they have to find the right balance between removing conflicted remuneration, and protecting people’s rights.

“…You want to remove conflicted remuneration from the industry and from the profession, which everybody agrees with. But commercially of course, people have entitlements that they’ve built businesses on and business valuations on…”

“Advisers have the freedom to change licensees and that decision shouldn’t be made purely just because of commercial restrictions, but what these regulations do is effectively make the decision purely commercial.”

Phil Anderson, COO of the AFA, says that this issue has come out of the dark and will affect many individuals.

“This is something we were completely unaware of until last week. It’s something that’s come as a complete surprise to the industry and is going to impact on a number of individuals who’ve either transferred licensees in last few weeks or are in the process of doing it. We’ve started discussions with the Government and intend to work with them to come up with a sensible solution.”

Anderson says that for now, advisers need to put things on hold until they have had a chance to resolve the issue.

  • James on 19/07/2013 3:03:35 PM

    The car industry is on hold, financial planning industry is on hold.... when will Labour learn business needs confidence rugs won;t be pulled from under them. Changes should be introduced when absolutely necessary and with appropriate time for business to adapt...

  • Mark on 19/07/2013 3:13:13 PM

    Labor has crushed business confidence in this country with ill conceived legislation, generally initiated by special interest groups.

    Agree with the sentiment whether this issue was an unintended consequence or not given that the Industry Super fund movement were such a large part of FOFA design.

    Policy making process in Australia is a disgrace and it is hurting business - the only ones not to see that are the ALP and the union movement.

  • James on 19/07/2013 3:17:01 PM

    Another day, another stuff up

  • Craig Yates on 19/07/2013 4:03:01 PM

    This is the result of "policy on the run" by the ALP with no adequate due diligence on the flow-on effect, the restriction of trade, the impact to business value and the so called "unintended consequences"
    The whole of FOFA is riddled with "unintended consequences" because of the amateur way in which it was created, announced and force fed to the industry.It is a disgrace.The ALP are incompetent and unqualified to run the country.
    Kevin Rudd has had 2800 meetings in 3 weeks and is on a mission to change the world so his gargantuan sized ego can survive.
    He will continue to make policy on the run with no regard for the immediate or long term consequences, just as long as he can retain power.Soon, the size of the ball of red tape will be blocking out the sun and instead of worrying about global warming, we will be freezing to death along with numerous industries the ALP seem intent on destroying.

  • alleycat on 19/07/2013 4:13:18 PM

    Dear Mr de Gori, whilst, 80.0% of ARs are owned by or aligned with product manufacturers, why turn a blind eye to the greatest conflict of all.
    you cannot be serious !!

  • Buddha on 19/07/2013 4:21:35 PM

    So, if I was in a professional organisation and left, I would commonly be under a non-compete (legally or morally). Now if a client decides it wants to follow me, no one wouldstand in the way. If the clients dont choose to do that, are they really clients and do I really deserve their revenue stream?

  • Alistair on 19/07/2013 4:48:24 PM

    What an absolute joke for Krudd and his cronies. Inexperienced nutters they are announcing policy on the run without a thought for the lives they are ruining and we have to pay yet again as business and families suffer for there mistake after mistake.. As a voter, I am fed up. As a business owner, I know I will be forced to reduce the hours of staff shortly and compromise them. This hurts me as a person as I admire my staff as we are like family. But the viability of my business is also of issue.
    This is not the country we should be having. Where class warfare and idiots with no business sense are in charge of our lives and destiny. Surely we deserve better than this. Surely we are deserving of respect as voters. Surely we are not a country whereby mateship is forgotten as the language of the past. Surely we can have Australia back by getting rid of this pathetic excuse for a government. Bad policies created by fools benefiting no person and hurting the very people that matter. Us voters.

  • Fedup on 19/07/2013 5:18:40 PM

    I believe, this country is on the verge of collapse, if this government is returned. If unemployment increases we will see a fall in property prices from highs never before seen in inflation adjusted terms. This would see bank lending constrained and a potential disaster. Sounds over the top, but this is what i am worried about. Tell me im wrong, i may just be having the worst week of my life.

  • Jeff M on 19/07/2013 6:13:27 PM

    Would like to see if a plain old SWOT analysis is being undertaken on regulations being introduced, coupled with the experience of the decision makers.

  • The Naked Adviser on 19/07/2013 7:43:50 PM

    Do we really think this was an honest mistake?FPA show some guts and call it what it is or you are no better than those who did this. Why would you bother paying for FPA membership to be represented with such a gutless response.

  • David Foster - Wealth Partners Pty Ltd on 19/07/2013 8:26:56 PM

    I am no longer sure who is calling the shots with FOFA. Whoever the party or parties are, it is unconstitutional to slip such a far-reaching exclusion to Grandfathering provisions at the eleventh hour, without industry consultation.
    It makes a joke of the whole process of FOFA and will only destroy whatever industry support may have existed.
    Clearly, the architects have no idea about commercial realities for experienced and long serving Financial Planners in coming up with this surprise.

  • Steve on 20/07/2013 1:17:46 AM

    Oh dont worry.....the FPA will do everything in their power to help government destroy the FP industry even more than what they have managed to destroy so far. Whats a bet a new solution comes out soon in the form of a course you can do online for $800

  • Geoff on 21/07/2013 6:34:43 PM

    Yes and the managers are taking advantage of this already. looking to reap great rewards in commissions income that they do not have to pay out to the new adviser once they move. fix it now treasury.

  • Rod on 22/07/2013 9:22:15 AM

    Why has this come as a complete surprise, hasn't anyone read the legislation ? Have all dealer groups and everyone else involved accepted all of this without due diligence, this beyond a disgrace , it shows complete Incompetence

  • Peter Johnston - AIOFP on 22/07/2013 10:09:38 AM

    Our industry has fallen for the old political diversionary trick where most got ‘hot and flustered’ with the OP IN proposal, lobbied hard on that, supposedly had a win but let all the other nasty elements through after being manipulated by the Minister. The industry leaders at the time have been derelict in their duties to the independent sector and should be ashamed of themselves.

  • jason duggan on 22/07/2013 10:39:42 AM

    I have read all these comments and after endless nights of not sleeping thinking my business will be ruined, even though its Fee for service etc..... the extra hours of paper work, eductaion, cost to my bottom line and for what ? if you read this best interest duty properly you cant take on new clients and have to advise old ones to leave into thin air. Tell as many people as possible to vote labor out please

  • Clem on 22/07/2013 11:02:15 AM

    Guys, chill just a little. The sun will still rise tomorrow, even if only because Kevin has to bend over to tie his show laces.
    Learn a lesson, don't ever build a business off the back of government regulation.

  • jay on 22/07/2013 12:21:14 PM

    unfortunately we deal with advice on superannuation, how can you not build your business and be affected by government regulation. I have seen model where they charge fees based around mortgage strategies.

  • Steve on 23/07/2013 12:24:35 AM

    I and every single FP i know are DISGUSTED at the FPA & their gutless, toothless, featherweight, fence sitting, backstabbing response, tactics & covert backing of Fofa & compliance/education issues.
    Seriously folks, every single IFA should be outraged by the FPA & send them a message by ending your membership. They have destroyed this industry!

  • SAM on 23/07/2013 9:03:31 AM

    Well there you go! Too bad if you borrowed to build a business by buying BOOKS, your control of the goodwill of your business, removed from your ownership and control by legislation, how could the dealer groups not realise this. I know several advisers who have borrowed very large amounts to buy business books over the last few years that now cant be sold. Wonder what the Banks view on the security is going to be? What is the point of continuing doing that? It shows you that they WANT everyone on FEES asap. Today. period. They wont be able to change this law, its so deeply imbedded in the FOFA legislation.

  • Peter Johnston - AIOFP on 23/07/2013 9:40:18 AM

    We can only assume that our 'industry leaders' at the time had read and understood all of the regulations but chose to ignore them preferring to collude with Shorten and the industry funds on the OPT IN farce. That my independent friends sums up exactly where your fees are going and what they are doing to 'assist' you.

  • Keith L on 9/09/2013 11:20:31 AM

    The fat lady has sung and it was our tune. Let us all hope that Mathias - as he seems to know the melody - will have sufficient strength in his conducting arm to bring the concert to a satisfactory conclusion and in a reasonable time.
    The amateurs may now withdraw to the wings and let the professionals get on with the business. The ISN and any others shouting advice from the audience may now withdraw so that orderly and justified applause may be reinstated.
    I expect there will be at least one curtain call after the performance.

  • Peter Johnston - AIOFP on 20/07/2013 12:44:38 PM

    It has come to our attention that a former senior Executive from a major Institution has been the major instigator of the more insidious FOFA regulations. This is not the work of a public servant in Canberra trying to understand how our industry works, this is the work of someone who has worked at a senior industry level and is taking great pleasure in trying to bring down the independents in favour of her institutional friends. No doubt this person will return to her roots once the job is done or the ALP are out of power. We will be watching very carefully where she may end up and will certainly be voicing our concerns on behalf of all independents with the particular organisation involved.

    Most agree that product commissions and advisers being reminded of their duties to clients was fair and reasonable but the lengths to which FOFA has been taken is a disgrace and most un Australian. We believe everyone deserves ‘a fair go’, but FOFA has been viciously engineered to inflict as much pain as possible on small business.

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