The National Australia Bank and its wealth management arm MLC have warned that the annual fee disclosure arrangements contained in the Future of Financial Advice (FOFA) legislation could add millions of dollars to the cost of the financial advice process.
In a submission filed with the Parliamentary Joint Committee reviewing the FOFA legislation, MLC said it did not support the proposed annual Fee Disclosure Statement (FDS), "particularly given the amount of disclosure already required".
"However, if it is introduced, we consider it should only be required for new clients from the commencement of the FOFA reforms," the submission said.
"MLC conservatively estimates that the cost to implement FDS for MLC super (i.e. excluding Managed Investment Schemes) will be between $3-6 million and $500,000 ongoing per annum," it said.
"MLC believes that this requirement was not intended by the original policy and is unlikely to deliver a superior customer outcome, yet imposes significant costs on the advice process," the submission said.
It said the FDS would be a duplication of the existing system and would require "extensive and expensive system changes, adding significant costs to the provision of financial advice to the industry and ultimately to consumers".
"It should be noted that existing product disclosure in superannuation and Managed Investment Schemes provide a dollar fee disclosure with the exclusion of whole of life and endowment products," the submission said.
Elsewhere in submission, NAB/MLC said there should be an alignment of the commencement of the FOFA ban on conflicted remuneration with the introduction of MySuper as the mandatory fund (for contributions for employees who have not exercised a choice in relation to a fund); and a transitional two-year implementation timeframe for both FOFA and MySuper before sanctions apply.
As well, it warned that there exists a possible unintended conflict between the stated policy and the draft legislation, whereby a financial adviser providing individual advice on insurance in superannuation could be potentially subject to the ban on commissions for group insurance.
