The protracted Future of Financial Advice (FOFA) process is deterring new clients from seeking advice.
“As advisers, the problem we’ve had all the way through the process is that while our business is FOFA-ready, the whole tone of FOFA is delivering a message to our [potential] clients that unless regulated, we can’t be trusted to do the right thing by them,” Paramount Wealth Management principal Wayne Leggett told InvestorDaily.
“People who should be coming to see us are reluctant to because they think if we need all these rules in place and being made to jump through all these hoops, they realise it’s a protracted process and therefore it’s going to be expensive,” he said.
Paramount’s existing clients were not perturbed by FOFA, as they trusted their advice relationships, Leggett said.
However, new and potential clients who became aware of the legislation through the advice process became discouraged to take up advice, he said.
“Every additional step we have to take to remain compliant adds another cost element in there.
“The clients begrudge the extra paperwork and the costs, so while FOFA is well-intentioned all it does is impede the process and undermines the general public’s faith in us.”
In addition, Leggett said it was a myth that financial advisers’ role was to educate clients.
“It makes sense in principal but at the end of the day, the average client doesn’t want to be educated anymore than I want my doctor to explain to me why he’s going to carry out a particular medical procedure,” he said.
