FOFA reforms failing consumers and industry
Most financial planners believe they will have to increase the fees they charge clients as a result of the Future of Financial Advice (FOFA) reforms, a new survey reveals.
Responding to the survey by mergers and acquisitions consultants, Radar Results, one in four planners said they were considering leaving the industry due to the impact of the reforms.
Radar Results principal, John Birt, said the results showed that FOFA has "failed to achieve its objectives" and would drive planners away from the planning sector and increase the cost of advice for consumers.
"The Government stated that FOFA would improve the quality of advice, protect investors and encourage more people to seek financial advice," he said.
"If 69 per cent of financial planners need to increase their fees to cope with increased costs, how does this encourage more people to seek advice?"
The survey also found that 92 per cent of planners did not agree with the two-year opt-in requirement, with more than 40 per cent predicting they will lose clients as a result.
While 86 per cent said the FOFA reforms will force them to spend more time on paperwork, which one respondent said would impact the service they could offer clients.
"The costs to the smaller clients have to increase to cover the extra that will be required with the increased paperwork," one planner said.
"Many were borderline profit anyway or ‘pro bono' while they grow their wealth and being subsidised by larger clients."
Although the majority of planners were critical of the FOFA reforms, 82 per cent agreed that higher education standards were needed.
"I 100 per cent agree that educational standards should be increased and the barriers to entry into the industry should be made harder, this will weed out the un-scrupulous salesmen in the industry that rip people off," another respondent said.
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