Australian planners appear to be doing better than their UK colleagues in reaction to changes in their operating environments.
Research by Fidelity in the United Kingdom on planners’ attitudes to proposed regulations that define independence, provides an interesting comparison to Australian planners’ attitudes towards the introduction of the Financial Services Reform Act (FSRA).
The FSRA provides an enforced definition of “independent”, while in the UK draft proposals have only just been released by the Financial Services Authority (FSA) with regard to how financial planners define themselves.
A common aspect of both the UK proposals and the Australian legislation is that for the adviser to be called independent, any commissions paid to advisers must be rebated to the investor, who is then charged a fee.
However, this year’s survey by Fidelity Investments in the UK indicates advisers there are still very concerned about the proposals and the affect it will have on the status of advisers.
The survey indicated that only about 12 per cent of UK advisers are currently “largely fee based”. A similar survey undertaken by Perpetual in Australia at the end of 1998 showed that those Australian advisers surveyed received one-third of their income from fees.
The Perpetual survey also found that advisers predicted within two years they expected nearly half (47 per cent) of their income would be fee based.
So, Australian advisers appeared to be getting ready for change and were well down the track even before details of the current legislation were known.
On the other hand, in the UK survey, 82 per cent of those surveyed by Fidelity say they see reforming proposals by the FSA as “quite unfavourable”, with 29 per cent strongly opposed.
A similar strength of feeling in Australia started to dissipate several years ago, and there is probably majority acceptance today that disclosure generally is expected by investors.
Surprisingly perhaps, the vast majority of respondents in the UK believed that the proposals would not improve choice (87 per cent), would reduce the availability of independent advice (92 per cent), and lead to a weakening of consumer protection (81 per cent).
It is hard to imagine a similar survey here producing the same sort of responses from advisers today. We suspect the responses in the UK survey could have been influenced by concern about change itself, and the new operating environment that this brings.
However, in Australia, we believe advisers have already travelled a fair distance down the disclosure road and are showing the required maturity and flexibility to adapt well to the new regulatory environment here.
Gerard Doherty is groupexecutive of PerpetualInvestments and MichaelGordon is managing director of Fidelity InvestmentsAustralia.
