FOFA horse trading deterring consumers at their cost
The back and forth nature of the Future of Financial Advice (FOFA) amendments are likely to cause consumers to put off seeking financial planning advice costing them about an average of $1600 per year according to Adviser Ratings.
Writing in the most recent Adviser Ratings newsletter Christopher Zinn, campaigns and communications director at Adviser Ratings questioned what members of the public would make of the return of opt-in, fee-disclosure and changed standards around best interest duty and conflicted remuneration.
"It's not unreasonable to assume another round of argument about what these terms really mean and what they do and do not achieve may drive even more to procrastinate and sit on the wall at no little cost until someone cries ‘peace'," Zinn said.
As a result of this inaction, he said consumers could be on average $1590 worse off per annum compared with a similar person who had sought financial advice.
The figures were based on a Financial Services Council submission using research commissioned from KPMG Econtech and were based on savings made after the cost of the initial advice with Zinn stating that poor, little or no advice had as a result of FOFA uncertainty would impact members of the public.
"So there's a real cost to be considered by doing nothing or worse by taking advice from those who have little or no expertise. Of all the figures bandied about the continuing cost of not engaging or trusting financial advice is a significant one. It's one area all sides seem to agree about but for which we don't yet have an answer they can settle on," Zinn said.
He also stated that while industry groups have argued over the cost of FOFA and the recently disallowed amendments the level of movement around the FOFA reforms is likely to cause some consumers to take no action until it is resolved.
Zinn said that position may be tenable for consumer if the FOFA rollback was to settle on the conditions set in July 2013 however more changes were expected following yesterday's announcement that a limited number of amendments would proceed.
"If there was consensus, and understanding, about the numbers consumers could be forgiven for celebrating the return to the original legislation. It was just as they were getting their heads around what FoFA might actually mean, in terms of an ASIC register and the Cormann ‘reforms' of the legislation, most bets were off," Zinn said.
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