Less people getting advice 'ridiculous', says FSC CEO

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The time and care spent by an adviser fulfilling their best interest duty means higher costs for clients, but what about those who just want a small bit of tailored advice?
 
In its current form, FOFA legislation does not allow clients to instruct their adviser to limit the advice they receive to their specific needs at the time. The risk is that fewer people will seek and receive financial advice, which means Australians will have lower financial security and general wellbeing, says Financial Services Council chief executive John Brogden.

“Adhering to best interest as defined in the legislation means the adviser has no choice but to take into account the full circumstances of an individual’s situation and provide a full comprehensive plan – even if the client only wants specific, limited advice,” he says.
 
Many people do not want or need a full financial plan, but just specific advice following a particular event such as inheriting a sum of money or changing jobs.

“The advice they receive and the price they pay should reflect the service that they want. However the legislation does not allow for this. As a result many people in such situations will simply not get financial advice,” he says.

Brogden approves of the announcement by Assistant Treasurer Arthur Sinodinos just before Christmas that the unworkable elements of the Labor-introduced FOFA reforms will be amended.
 
In particular, he supports a change to allow financial advisers to scale their advice to the instructions of their clients and in their best interests.
 
“There is no point raising the professionalism and quality of financial advice if it is priced beyond the capacity of the people who most need it. It is a ridiculous outcome if the result of the reforms was that less people get financial advice.”

The Liberal government has said it will:
  • Change the best interests duty to assist scaled advice
  • Remove the two year opt-in requirement
  • Change the grandfathering clause to make it more fair for all financial planners when changing licensees or selling their businesses
  • Remove retrospective legislation on fee disclosure statements to apply only to new clients
  • Permit commissions for advisers placing clients in financial products
Changes are likely to be legislated in the Autumn sitting of Parliament. 

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  • Adam P on 8/01/2014 9:50:41 AM

    What a load of BS. I don't support a lot of Silly Billy Shortens over the top FOFA legislation as it was designed to help his Industry Fund buddies not financial advice clients (or consumers as a lot are treated). But seriously this is a load of BS. When they brought in FSRA it was to make advice more complete as advisers were picking the eyes out of a consumers situation and just grabbing the low hanging / well paid fruit and not doing a full job for the consumer. Thus limited advice was scraped. But you could still "scope" the advice to suit what the client wanted at a suitable level. And the same situation exists under FOFA.
    Please explain how you do a good job for a client in a specific situation if you dont have a better overall understanding of their overall financial situation ??
    We do loads of "scoped" individual scenario advice but we let the clients know what else we think needs to be addressed and ultimately it is their choice to address those issues or not.
    John Brogden, please explain exactly how scoped advice cannot be completed for a client now ?? Or is this just more complete BS out of your mouth like the whole adviser churn problem the FSC pused last year??
    Maybe you should go back to politics where this type of BS is the norm.

  • PETER CORRIE on 8/01/2014 11:59:13 AM

    I agree with John Brogden on the issue of the Best interest duty by giving the client the choice and flexibility of limited advice or the alternative of a fully comprehensive financial plan. More people will get advice that is affordable and we can afford to stay in business.
    The other changes to the burdensome and unfair FOFA mentioned in this article, once legislated and implemented by the Liberal government will put us in a much better position to negotiate more effectively and efficiently with our clients.
    It will also mean that some of the menacing threatening and time consuming activities of ASIC will diminish.

  • James Smith on 8/01/2014 6:32:53 PM

    If we believe we are an advice profession we cannot condone consumers coming to us to dictate what advice they want us to provide.
    It would be unnacceptable for the medical profession to be dictated to by their patients and the same applies to our profession. If a super fund wants to engage with members without a qualified adviser it should be made clear to the member that they are not receiving advice. As advisers we may chose to limit the scope of the advice after meeting the client and discussing their affairs. This is quite different to a customer turning up and demanding answers to a certain issue as it may simply be inappropriate to provide an answer without a more thorough understanding of the issues. A member does not know what they don't know and inexperienced and poorly trained telephone service lines or desks are likely to do more harm than good.

  • Craig Yates on 1/04/2014 10:32:22 AM

    If you attend your GP because you have the flu or an infected toenail, is your GP going to run you through a full and comprehensive medical examination and a series of Pathology tests and scans to ensure that instead of just treating the current issue you request to have rectified, they have missed the fact that you in fact have Cancer that has not presented with any symptoms whatsoever?
    If this was the case, every time you visited the GP, they would again have to ask for the full assessment at your cost, only to turn around and advise you that you have the flu and you need to take some medication to rectify the problem.
    Do you think this process would add to the cost of seeking medical advice and convince the public that it may just be easier to work through it themselves ?
    If a client were to specifically request limited advice for Life Insurance to cover their debt and protect their dependant family and we told the client that in order to provide any advice, we first must assess their entire financial position and provide a full and comprehensive financial plan covering all facets of advice including investment strategy, retirement planning,debt reduction strategy, superannuation advice and that it will take 3 weeks and a cost of $2000 for the plan document......is it any wonder there exists a disconnect with the public seeking advice ?
    In addition,if that client died 2 weeks later, have we acted in the client's and their family's best interests or have we acted in the best interests of those whose ego's constantly require pumping to validate in their mind their own existence?
    Do you think there may be a high chance that the deceased client's Lawyer may have a red hot crack at you for not implementing the protection the client specifically requested ?
    The client should have a clear and flexible choice of full or limited advice in addition to a full, transparent and flexible choice about how they pay for advice.
    I agree with James Smith on the point that even though a client may only require scoped or limited advice, we as advisers still need to have a clear understanding or overview of the clients position and the reason they are only requesting limited advice .However , I believe it is entirely ridiculous for us to say "sorry, unfortunately we cannot help you if you do not wish to proceed with a full financial plan for $2000, even though you only wish to receive advice on one specific area".
    What a great way to develop client relationships, cultivate loyalty and enhance the ease of accessing quality advice!
    The vast majority of issues in recent years within financial services has arisen due to a lack of or breach of ethics.
    You cannot legislate against a lack of ethics.
    The very nature of the profession and the trust placed by the public in the services provided demand the very highest standard of ethical behaviour.
    It would be more value to the public and AFSL's to ensure that all advisers must attend a biennial 1 day ethics course and achieve accreditation rather than attending multiple sessions on whether the Chinese economy is going to bust or boom and whether top-down or bottom-up investment style is better for your client!!


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