Shadforth Financial Group chief executive Tony Fenning (pictured) believes the implementation of the Future of Financial Advice (FOFA) reforms is likely to entail a lot of work with little benefit to advisers and clients.
Fenning said the group was supportive of the overarching intentions of FOFA, but there remained a massive list of questions about how the reforms would work and whether they would actually benefit anyone.
Shadforth is still researching various options that will result in the dealer group repositioning itself in the value chain, such as potentially becoming a trustee or responsible entity of the funds that it uses for its core client investments. Fenning said while the group was confident that there were enough options out there for Shadforth to adapt to change, the messages coming from Government with regards to product and services were confusing.
“It looks a bit like they want the industry funds, large banks and insurance companies to be the only ones able to be product manufacturers, and that doesn’t really sit well with a highly competitive industry, in our minds,” said Fenning.
He said the group would prefer to see the Government take another direction and actually improve oversight and policing across the industry, encompassing large, middle and small financial planning dealer groups and independents.
“We’ve got a very prescriptive and massively complex regulatory regime already, but it’s only enforced selectively,” he said, asserting that compliance pressure is more often placed on the larger groups, while the smaller players slipped through the cracks. “Storm, for example, was the result of a poor piece of policing of the existing legislation. It’s not like that can’t happen again as a result of some of these new changes.”
Fenning was also concerned that the pressure on revenues as a result of a new market and regulatory environment was pushing smaller advice groups or individuals towards advising on and managing client portfolios of direct shares, where the advisers were effectively acting as fund managers.
“This is one of the impacts of the way people are responding to these regulatory changes, but we don’t think that’s a healthy thing to do – as an industry there is not a great deal of evidence that advisers are great fund managers,” he said.
