FSC proposes alternative to opt in
The Financial Services Council (FSC) has proposed a three-year renewal framework, which would allow consumers to opt out and cease payments at any time, as an alternative to the opt in proposals.
This approach would put complete control in the hands of consumers and reduce what would be a large administrative burden on small businesses, according to FSC chief executive John Brogden (pictured).
He added it would not drive short-termism in the way that opt in would, and would retain a high level of consumer protection, he said.
Consumers should also receive at least an annual statement from their adviser outlining fees and services over the prior 12-month period and for the following 12 months, Brogden said.
The annual opt in provisions put forth in the Future of Financial Advice (FOFA) reforms would actually reduce consumer protection by skewing financial advice towards short-termism, he said.
“This will create a ‘fast food’ style advice industry — one that provides ‘McDonalds’ advice and churns through customers as quickly as possible,” he said.
To burden small practices with an additional layer of regulation would increase the upfront cost of advice and force many small advice practices out of business, he added.
An annual opt in requirement is counter to consumers’ best interests and will send the industry back to a time when the emphasis was on sales rather than professionalism, he said.
Brogden also said it was amusing that the most vocal supporter of opt in and loudest opponent of opt out — the consumer group CHOICE — has told its own members: “To keep your membership going we’ll debit your credit, charge or debit card automatically every three months until you tell us to stop”.
“As they say, people in glass houses,” Brogden said.
Brogden also spoke out against a blanket ban on all volume related payments, which he said would cause major structural disruption to the industry and lead to consolidation, which would benefit the biggest players and reduce consumer choice.
It would drive up costs and reduce scale benefits currently enjoyed by consumers, he added.
Instead the FSC supported a product-neutral framework that addressed conflicts without sacrificing scale benefits.
Brogden said this would be achieved by banning payments that increased access of visibility on platforms or Approved Product Lists; by banning adviser remuneration schemes based purely on sales volume; and banning volume related payments directly from fund managers to licensees or advisers.
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