FoFA becomes key focus for Coalition

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Federal Member for Bradfield, Paul Fletcher announced in a speech to the Not for Profit Financial Planners Conference that the coalition did not support the FoFA rules being pushed on planners, and that if elected, they would implement a number of changes to the law.

The starting point for the FoFA reforms was the Ripoll Inquiry in to the collapse of Storm Financial, but Fletcher says there are a number of costly measures being included in FoFA that were not recommended by the inquiry. These include disclosure rules on annual fees for products that have been in place for many years, and the banning of commissions for insurance provided inside superannuation.

“These changes, we in the Coalition think, will have costs that exceed their benefits,” said Fletcher. “They make it harder for independent advisers to provide advice and charge the individual recipient of that advice. Given the complexity of superannuation and financial services generally, and the importance of the widest availability of good financial advice, we think this is regrettable.”

Fletcher announced some of the changes the Coalition would be implementing including:

  • The complete removal of opt-in arrangements
  • The simplification and streamlining of the additional annual fee disclosure requirements
  • Providing certainty around the provision and availability of scaled advice
  • Refining the ban on commissions on risk insurance inside superannuation

IFAAA member Fergus Hardingham doesn’t agree with Fletcher’s proposed changes, saying FoFA has been watered down too much already.

His firm has had compulsory opt-in annually for a number of years and he says it makes the industry look more professional.

“It’s good for advisers as a profession, good for clients, and good for us as a firm to sit down and have a more even playing field,” he said.

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  • Simon on 11/04/2013 1:32:47 PM

    I work in support for a solicitor and an adviser. I can see the merit in opt-in from a consumer's point of view and I don't really see an issue with the fee disclosure statement. I really believe that these should have been implemented in less intrusive ways- i.e. gut the SOA of all the noise and have a 12-24 page document that cuts to the chase and clearly shows the fees and rights of the client under your advice- something that we already do though. Keith brings to light the most interesting aspect I believe.

  • Greg F on 7/02/2013 12:53:59 PM

    Are these the same lawyers who take a large percentage of a settlement claim - an amount which would far out-weigh any 'hourly billed' fee?
    Further, if you go back to a solicitor about something he did for you even 5 minutes ago, he will charge you again. We don't. And gues what, the public generally hate the way lawyers charge. And isn't this supposed to be all about what the public want??

  • alistair on 7/02/2013 12:42:18 PM

    Dear Mathew Lock - FOFA and paying for advice you gave 5 years ago. I really do not think you understand FOFA. We as advisers as opposed to the legal profession are required to review clients EVERY YEAR. Should we be paid Mathew - me thinks yes. The client does not have to undertake our services and are well within their rights to go elsewhere. Perhaps living in an ivory tower clouds your sense of judgement. Why do'not you come down of the cross and hang out with the rest of us. Reality check for you Mathew and to those in favor of opt in - is legislation and economics. Both of these conspire to have dire results for any investor and quite frankly we all know that folk seem to be able to plan their holidays better than their financial lives. Reality check also is that if we allow the policies of incompetant ministers to decide on our future and that of our clients - one only needs to look at the state of Australia. Wake up Mathew and the rest of the Opt In ivory tower crew. You are in need of perhaps breaking your tablet in half - I think you are merely on a medicated high !

  • Matthew Lock on 7/02/2013 12:00:19 PM

    Some months back I was listenting to PM on the radio and a lawyer was being interviewed about FoFa and in particular Opt In...his point...why should my clients keep paying for advice I gave them 5 years ago...pretty clear really.

  • Keith L. on 7/02/2013 11:12:29 AM

    Perhaps Fergus, Matthew and MG have a handful of high net-worth clients for whom a close hand-holding process the client is prepared to pay for is appropriate and acceptable. I have a large client base the majority of whom are best described as "battlers." A few of these accounts pay me as little as $20 a year on a commission basis. Of course I don't sit down and have a conversation with these clients every year for the simple reason they could not afford to pay the fee and the income received doesn’t justify the expenditure on my part. However, when these clients seek information on their account, some general information or need help with financial planning matters, I am happy to provide it at no extra charge because it usually happens at intervals of 4 to 5 years.

    I know that cross subsidisation is happening over my client base as it also happens over time. Some years I receive payment for no service in these circumstances but there will also be years where the service provided far exceeds the income for the current and other years. I also know in most instances the client would be unable to pay for the cost of that service at that time.

    This segment of the population has been ignored by the industry and the law makers and I guess my concern for the welfare of this class of client places me somewhat unjustifiably into the category of one of those greedy planners who do nothing to earn their fees and charges!

    I strongly object to the inference that the way we receive our remuneration is in any way a reflection on our professionalism.

  • MG on 7/02/2013 9:34:28 AM

    I couldn't agree more with Matthew - well said!

  • Matthew Lock on 7/02/2013 6:25:31 AM

    Well said Fergus...I couldn't agree more. Opt in has always been about informing the client about the fees their paying for ongoing services and then letting them decide if they believe they have got value for money. I believe that those planners who have resisted opt in suspect that they haven't delivered this value and they fear they will lose the client because of their failure to do so. The sooner the industry moves away from the "money for nothing and their bps for free" mentality the better.

  • Mervin C Reed FAICD on 6/02/2013 9:54:58 AM

    The Coalition is correct as the costs far exceed any consumer benefit. If a client does not want to pay the fees then they won't and we do not have to have all this nanny state stuff. We tie up the regulator with rubbish work that achieves nothing. Better to focus on the products and quality of advice. Go Coalition you have my vote.

  • Martin Ball on 6/02/2013 9:50:13 AM

    Fergus Hardingham clearly is one of those wonderful people that thinks inflicting more red tape on an industry makes it more efficient and cheaper for the client. Fergus, you are sadly misinformed. How on earth does opt in make you look more professional. What other profession says "look I have opt in. I am professional. Very very sad

  • Greg F on 7/02/2013 11:17:34 AM

    A lot of people who think these proposals are good make their living off the back of the advice industry - and sometimes specifically due to legislative changes - without actually dealing with everyday clients. They work for institutions or professional (?) bodies, where their salaries come from funds under advice or from the adviser members, who pay their dues from clients fees. ISN employees who, I presume, get paid indirectly from union super fund members (are they aware of that?), politicians, who have now accountabilty or redress for their financial waste,and other industries that profit from the people at the coal face, like software providers etc. I don't tell other industries how to charge for their services,as I only see it from the outside.

WP forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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