The Federal Government would be likely to garner grudging (but majority) financial planning industry support for its Future of Financial Advice (FOFA) legislation if it were to drop the two-year ‘opt-in’ requirement.
That is the key finding of a Money Management survey conducted in the immediate wake of Assistant Treasurer Bill Shorten releasing the first FOFA legislation.
As well, the survey found that even some of the flexibility negotiated by the Financial Planning Association around the manner in which opt-in can be managed by individual planners has failed to win too many fans.
The survey found 56 per cent of respondents believed the flexibility around opt-in would make the exercise easier or less costly, whereas 35 per cent believed that while it might make life easier, there would be no diminution in costs.
Ten per cent of respondents believed the more flexible approach would make handling opt-in both easier and less costly.
With the Government having conceded ground by allowing a continuation of commissions on individually-advised risk commissions inside superannuation, survey respondents were asked whether – if the two-year opt-in were removed – they would regard the legislation as delivering broadly sensible reforms.
In answer to the question, 68 per cent agreed that removal of the two-year opt-in would leave a broadly sensible package for the industry.
However, what also became clear from the survey was that the Government’s use of Rice Warner research suggesting the two-year opt-in would cost an average of around $11 per client was well wide of the mark, with 66 per cent of respondents believing it would cost closer to $100 a client and a further 18 per cent believing it would cost $50 per client.
Only 8 per cent of respondents were prepared to agree with the Rice Warner figure, which resulted from research commissioned by the Industry Super Network.
The survey also revealed the degree to which Shorten had been wise to move away from its original position of imposing a total ban on risk commissions inside superannuation, with 60 per cent of respondents saying they believed the concession had made the overall FOFA package more palatable.
The Money Management survey found that while a majority of planners believed they might be able to live with the FOFA legislation – minus the two-year opt-in – many held ongoing concerns about other elements of the legislation, particularly the approach to platform rebates and asset-based fees.
In a week during which the Commonwealth Bank revealed it was moving to acquire Count Financial, many survey respondents expressed concern that the FOFA legislation would serve to increase the power and influence of the banks and the industry funds, while doing nothing more than reducing the number of independent dealer groups operating in the industry.
