The federal government's decision to allow a soft introduction of its Future of Financial Advice (FOFA) reforms has prompted a number of dealer groups to scrutinise the cost regulation is having on their business.
SFG managing director Tony Fenning told InvestorDaily his business had spent 'in excess of a million dollars" on FOFA preparation, with the firm still "none the wiser" due to continued uncertainty.
"We've had IT resources set aside for the period of May [2011] to June [2012] to do the programming ready for the 1 July [2012 start date], but without any details of what actually to put on the paper," Fenning said.
"It's pretty bizarre, you can't scope the project, you can't do details, you can't do anything, yet we were told over and over again that it was going to be locked in on 1 July [2012].
"I don't think that in the case of our business that the cost so far has been dramatic, but we've probably spent $1 million on FOFA one way or another."
Dixon Advisory executive director and head of financial advisory Nerida Cole said the group had experienced a degree of cost pressure as a flow-on effect from FOFA.
However, as the company had been fee-for-service for more than two decades, Cole said she did not expect the business would need to make too many structural changes.
"It [cost of FOFA] has a flow-on impact in terms of trying to make sure the IT and the CRM (customer relationship management) services that we still use are able to apply that required information efficiently so that we can maintain obviously an effective fee structure for our clients," she said.
Reform uncertainty, however, did present challenges, she said.
Pivotal Financial Advisers executive manager Maria Cheer said the lack of reform clarity had also had an effect on the TAL-owned dealer group.
Cheer said Pivotal had been working closely with IRESS on Xplan for its streamlining processes.
The group had been encouraging advisers to use the financial planning software provider's "full capability", with Xplan expected to update its system as more clarity was provided, she said.
As there was still confusion regarding the exact reform detail, she said the group was "anxiously waiting" for the ASIC guidelines.
Last month, Financial Services and Superannuation Minister Bill Shorten handed the industry a 12-month grace period to comply with requirements of FOFA.
At the time, Shorten said the reforms would commence from 1 July 2012 "as originally announced", and the application of the provisions would be voluntary until 1 July 2013.
He added the revised implementation arrangements would "lower industry implementation costs" as participants would be able to "synchronise FOFA and Stronger Super reforms".
However, as Treasury is yet to release its FOFA cost analysis, many within the industry believe the government has not provided evidence to back up Shorten's claim.
According to figures from Investment Trends' Planner Business Model Report July 2011, 54 per cent of the 1396 planners surveyed said the largest challenge for them regarding the implementation of the reforms would be "providing advice affordable to lower balance clients".
The report also found 60 per cent of planners surveyed said FOFA would force them to increase upfront fees.
For a number of the dealer groups, the lack of FOFA details has lead them to devise their own practical 'next steps'.
SFG had been conducting scenario analysis with the help of former chief executive Tony McDonald, Fenning said.
"We're starting to knock out a few of the more far-fetched scenarios," he said.
For Dixon Advisory, Cole said the company had reallocated staff to an in-house FOFA working group.
"We've got a working group looking at it and they're working through options," she said.
Asked how much Dixon had invested in its FOFA plans, Cole declined to disclose a figure.
"I don't think we'd have a number that we've been tracking at this stage. But that is something that the working group is tracking to get a better idea of," she said.
