The current financial advice model is 20 years out of date, with the recently announced amendments to the Future of Financial Advice (FOFA) legislation representing a step backwards for consumers of financial advice, according to Chris Brycki, founder of Stockspot, an online exchange traded funds portfolio manager.
He said the current financial service model would be undercut by the provision of online services as consumers became more aware that they “are getting taken for a ride”.
Brycki said the FOFA amendments were a win for industry lobbying over consumers and would soften FOFA to allow conflicts of interest to continue in financial planning.
“The (amendment) news was welcomed by an industry that has become addicted to commissions, kickbacks and hidden agendas. Unfortunately it was a step backwards for consumers.”
Brycki disagreed that the amendments were required to make financial planning advice more accessible. Instead, he claimed that traditional planning firms were 20 years behind “when it comes to leveraging technology to help clients cut fees and achieve better investment outcomes”.
According to Brycki, traditional financial planning firms will be undercut by advances in technology and the provision of services and investments online in a similar way to what happened with 'bricks and mortar’ retailers and online shopping.
He said that in the past David Jones and Myer reported high levels of profit which were undercut by local and global online shopping providers, resulting in traditional retail sales remaining static for the past four years while share prices have fallen.
Brycki stated that similar moves would take place within financial services, claiming Australian consumers were being taken for a ride by the big banks, fund managers and superannuation funds.
He said Australians paid $18.6 billion in superannuation fees in 2013 but the larger retail super funds had recorded 30 per cent worse returns than industry super funds over the last 10 years, according to Australian Prudential Regulatory Authority statistics.
“There were just two retail super funds in the top 50 funds by percentage return over 2004-2013. We think that sounds suspiciously like Australians are getting taken for a ride.”