What’s the cost of bedding down FOFA? – Adviser Sentiment Part 2
Financial planners talk about what the costs of implementing FOFA have been for their practices even as they contemplate the next suite of changes stemming from tinkering with the superannuation system in the Budget, Malavika Santhebennur writes in part two of this feature.
As the advice industry grapples with proposed changes to superannuation, many advisers were also feeling the cost pinch of implementing the Future of Financial Advice (FOFA) reforms into their practices.
C2G Financial Services financial planner, Louise Bennett, said her firm has had to restructure office tasks, adding the reforms were another layer of bureaucracy.
"That's added to the cost of delivering advice, definitely. The cost of service has gone up because of the regulations by at least 30 per cent," Bennett said.
Bull Financial Group principal, Leanne Bull, said while she was a big believer of disclosure and transparency about the advantages and disadvantages of every investment option and the fees that accompanied it, she questioned whether an additional layer of disclosure through the fee disclosure statements and opt-in statements would really benefit clients.
"Clients already receive a statement of advice, it gives them what their fees are going to be, and they receive annual statements on their investments telling them what their fees that have been deducted out of their account are. They get an advice agreement that they sign that tells them what their fees are going to be," Bull said.
Clients were asking her if the additional statement was necessary, with some even wondering if they could opt out of opt-in.
"People should have the right to decide whether they really want to have the fees [disclosed] in four different methods instead of three. If they don't read the three, is it really going to help them get a fourth method? They're not going to read that either."
Self-inflicted wounds
Epona Financial guidance principal and financial planner, Lisa Duggan, acknowledged the increased costs of dealing with the compliance regime and tackling fee disclosure statements and opt-in statements at the beginning of the financial year.
However, she argued that some of the legislative changes were self-inflicted in the financial planning industry, and added it could have been prevented if the industry had moved towards becoming a professional earlier.
"I think it would be great if advice could be less expensive but unfortunately as an industry, I guess we've brought this on ourselves," she said.
"As an industry, we haven't addressed some of these things that have been bad practice in the past. That's led to legislation to try and stop that sort of behaviour."
Those practices included charging fees for advice that was not delivered, charging commissions, and low education standards.
"You've seen all the press about the negative outcomes in terms of people focusing on product sales rather than strategic advice. I've been doing this for 20 years now and things have got tighter and tighter in terms of compliance," Duggan said.
"I guess they needed to be because if we weren't as an industry going to stomp this stuff out, it had to be legislated out."
Shadforth Financial Group private client adviser, David Harvie, had also noticed significant, explicit cost increases across the board in the firm, as advisers invested in understanding the requirements of FOFA.
"We do have a dedicated infrastructure in terms of compliance with FOFA, and what I could say is, that team has come and addressed the adviser group. We have sessions in relation to this as advisers and associates," Harvie said.
Read part one of the Adviser Sentiment feature here: What's keeping advisers up at night?
Read part three of the Adviser Sentiment feature here: Miscellaneous concerns
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