The government's Future of Financial Advice (FOFA) reform package had lost its way, an industry body chief told a Parliamentary Joint Committee (PJC) hearing yesterday.
Association of Financial Advisers (AFA) chief executive Richard Klipin said there were a number of reasons but one stood out.
"Our view is FOFA got hijacked," Klipin said.
"The industry fund network hijacked FOFA to distort the outcome in their favour.
"Our view is that whatever comes out of FOFA must play to the national interest."
He reminded the PJC that a Rice Warner study quoted by Financial Services and Superannuation Minister Bill Shorten was commissioned by the Industry Super Network (ISN).
The findings of the Rice Warner report have been controversial to say the least. The study said the cost of implementing opt-in, which requires planners to get clients to sign fresh contracts every two years, was $11 per client.
The AFA has said the cost would be $100 to $120 per client, assuming clients responded swiftly to opt-in renewals. Other industry participants have put the cost as high as $175 per client.
IOOF head of wealth management Michael Carter, who was part of the AFA panel, said a cost of $100 per client would wipe out the entire profit margin of a typical regional practice.Klipin said the annual fee disclosure aspect of FOFA would add a cost and administrative burden to planners without providing an advantage to the consumer.
"FOFA as it stands will decimate the financial advice industry," he said.
He said the MySuper and FOFA implementation should be aligned. Asked whether 1 July 2013 was an appropriate start date for both pieces of legislation, Klipin said: "Absolutely."
AMP Financial Services managing director Craig Meller said in previous comments to the PJC that the two pieces of legislation were "inextricably linked" and should have the same start date.
