One of the unintended consequences of the Government’s Future of Financial Advice (FOFA) reforms may be a shortage of ‘generalist’ financial planners, according to the Association of Financial Advisers (AFA).
A white paper prepared by the AFA and CoreData-brandmanagement that included a survey of 1,343 financial advisers found that of all the reforms, the opt-in provision was the most objected to by advisers, with three out of five giving it a rating of 0-3 out of 10.
Most advisers argued that the requirement went against the long-term nature of advice and would create additional paperwork for both clients and advisers.
But AFA chief executive Richard Klipin believes that in the future, the unintended consequence of the opt-in might be that advisers will start to specialise in particular types of clients, creating an industry full of “specialists” and not enough “generalists”.
“We’ll end up with a whole bunch of Australians not getting advice because it’s not practical for businesses to service that niche.
“That’s okay in the cities, but what about the regional centres where the financial planner is part of the fabric of the community” he said.
The principal of brandmanagement, Andrew Inwood, said that the model the Government wants for financial services is much like the medical model.
“They want a GP, a pharmacist and a specialist, and they want them to be able to charge and be remunerated in different ways — and it’s up to the planner to decide where they fit in that,” he said.
The white paper also found that the proposal to ban commissions was still dividing the industry, with sentiment remaining more negative than positive.
About 43 per cent of advisers opposed the reform, 36 per cent strongly supported it, while the remaining 21 per cent did not feel strongly either way.
The report found that those advisers who opposed the ban were concerned that “the legislation will push up the cost of advice, making affordability an even bigger issue and potentially shutting an even greater proportion of people out of the advice market”.
But even those advisers who supported the ban on commissions on investment products remained steadfast in their opposition to an extension of the ban to risk commissions, fearing it would exacerbate Australia’s underinsurance problem.
More than half of the respondents were also opposed to the expansion of low-cost simple advice, stating it went against the ‘know your client’ rule and was a ‘dumbing down’ of the industry.
The strongest support was for the fiduciary duty reform, which three-quarters of advisers strongly supported, with many believing they already complied with the proposed reform.
