The majority of advisers surveyed by Radar Results believe it is likely they will lose clients as a result of the opt in for continuing advice reform.
Financial planning practice buyers advocate Radar Results recently conducted the online survey, with nearly 80 per cent of the more than 380 respondents self-employed (65.6 per cent self-employed and 13.1 per cent self-employed with their own Australian Financial Services Licence), while nearly 68 per cent were aged between 45 and 64.
Most of the respondents were either fee-for-service or were in the process of transitioning, and 68 per cent stated that commission-based practices would be worth less due to the proposed Future of Financial Advice reforms.
The survey also found 42.4 per cent of respondents believed there would be no change to their future business plans as a result of the proposed reforms, 14.2 per cent stated that they would retire earlier than planned, 9.4 per cent would sell part of their business, 4.2 per cent would sell all of their business, and 10.5 per cent would grow through acquisition.
The advisers were split between supporting and admonishing the key reforms — all except for opt in, which an overwhelming 90.8 per cent of advisers were against. Some 50.4 per cent of advisers were against the banning of initial/upfront commissions; 64 per cent were against the banning of trail commissions; 50.3 per cent supported fee-for-service charged as an asset-based fee on gearing products; and 51.2 per cent were against a ban on any form of payment based on volume or sales performance.
Some 57.5 per cent stated that if each client had to sign an opt in agreement every year, it was very likely they would lose clients, while 20 per cent stated it was somewhat likely.
Asked what comments they would send to Treasury in response to the reforms, many respondents expressed concerns that the opt in reform would have a negative impact on their businesses and relationships with clients. Some described it as ‘ridiculous’, ‘an administrative nightmare’ and ‘overkill’, while others were concerned at the number of ‘unintended consequences’ the reforms would have on their businesses and clients’ wellbeing.
A number of respondents stated that upfront costs to the client would increase due to the uncertainty of ongoing revenue. One respondent suggested that opt in should initially be every three years, with penalties for early termination ‘to allow for full cost recovery’.
Another adviser was concerned that opt in would eventually see certain clients who could not afford an annual advice fee drop off, such as retirees on the age pension.
Considering the reforms in general, some respondents felt they would lead to further consolidation in the industry, strengthening the ‘big players’ while slowly destroying individual practices. Some respondents felt that the reforms were being driven by the banks and industry superannuation funds, while others questioned why the industry was being pushed backwards towards the old days of ‘tied agents’.
Some respondents wanted to see more attention paid to fund managers and product manufacturers, and even the role of dealer groups.
