Opt in to increase the costs for business owners
Those who are in favour of opt in probably do not run their own business and do not understand the costs of implementation, according to the founder of an online petition opposing the reform.
The financial planner practitioner said he launched an online petition addressed to Minister for Financial Services and Superannuation, Bill Shorten, at the weekend because it was universally the most contentious issue among financial planners at the moment.
Preferring to remain anonymous “to keep the focus on the cause”, ‘Rob’ said advisers didn’t charge much upfront on the expectation that they would develop a relationship that would pay over time. He said that the danger with opt in was that advisers would feel they would have to charge more upfront if the risk was greater that clients would — whether intentionally or not — fail to opt in.
“There are a whole host of other unintended consequences to this proposal,” he added.
It is assumed that the argument of those for and against opt in is determined by their age. It has been argued that those who have been in the industry for a long time and perhaps are more dependent on trailing commissions would be against opt in, while the newer entrants to the industry are in favour of the reform. However, Rob, like many of those who left comments on his petition website, felt that the fiduciary duty requirement and a ban on commissions would achieve the Government’s intentions, without the need for further administrative burdens. He claims to run a fee-for-service practice, and while he is not against the opt in proposal in principle, he felt that it was administratively costly to implement — and would add complication to a process that had already been complicated by past regulatory intervention.
“Those who aren’t opposed to opt in probably don’t run their own practices and are probably relatively new to the industry. Those that run a business understand the costs of following these rules,” he said.
“The point is that [the regulators] are going one step too far.”
Comments left by signatories of the petition ranged from those simply concerned about increasing administrative costs, to those asserting that the reform would benefit fund managers and the industry super funds. Others questioned how one could implement a long-term financial plan in 12 months, with others agreeing that opt in does not take into account long-term relationships. Some remained concerned about where the liability would fall should a client not opt in; and then later, a dispute arose over poor investment outcomes.
“I want to impress upon the Minister, who is new to the role, that there is concern among the financial planning industry that opt in will create an unnecessary administration burden, increase costs, and will entail unintended consequences,” said Rob.
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