Industry continues fight
By
Kate Kachor
Mon 28 Mar 2011
Earlier this month, IFA ran a story on Bill Shorten's comments regarding the government's proposed Future of Financial Advice (FOFA) reforms.
In the article, the Financial Services and Superannuation Minister mentioned there was no industry consensus on reforms such as opt-in.
When the article was published our phones ran and inboxes pinged. It would appear the general consensus from our readers is that opt-in should be a no go.
The opposition's financial services spokesman, Mathias Cormann, also came out firing, wondering why Shorten would make such claims when all he was hearing was discord from the financial services market.
Industry chiefs and advisers also protested, taking issue with the Minister's claim that opt-in was not a concern.
One adviser slammed the Australian Investors' Association (AIA) for its broad agreement with the FOFA recommendations.
Quoting the AIA Newspoll survey, commissioned by the Industry Super Network (ISN), which found nearly 85 per cent of consumer respondents were in favour of the annual renewal of ongoing fees, the adviser questioned where 'Mr and Mrs Pensioner' would obtain the $2200 for the cost of their advice if paying directly and not through their superannuation accounts.
"[From] Centerlink? What about Mr and Mrs Average? Will they pay from after-tax dollars? Either way, fees for this advice is not tax deductible, which means the real cost to Mr Average is over $3200 pre-tax dollars," the adviser said.
"If AIA or ISN had some financial planning experience, they would know to levy superannuation accounts is more tax effective. Let me explain: contributions to super can be made from pre-tax dollars . any fees levied on the super account are also a tax-deductible expense to the super fund. Imagine that?
"So why would AIA or ISN think about their clients' interest first?"
The adviser then turned their attention to opt-in. While the adviser said the research showed support for banning investment trailing commissions, they said it was important not to underestimate the work advisers did and the fees charged to clients for the respective service advisers provided.
"You will find that the majority of advisers that charge a fee for service (not trails) generally have a client value position and a sustainable business model," the adviser said.
"The problem with opt-in is that the proposed legislation is drafted in a way that enables cancellation of a client-adviser relationship without the client's knowledge, consent or intent."
However, the adviser said, in the absence of written communication from a client to continue payment of fees, the wrap/platform/fund manager stops payment of fees to financial planners and consequently the financial planner stops servicing the client.
What are your views?
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