AMP has called for a regulatory impact assessment of the Future of Financial Advice (FOFA) before the draft legislation passes into law to avoid hundreds of millions of dollars in costs to the advice industry for no benefit to the consumer.
Speaking at a Parliamentary Joint Committee (PJC) hearing, AMP Financial Services managing director Craig Meller said that as Australia’s biggest aligned planner network, AMP found the level of uncertainty in the current drafting of FOFA inappropriate.
“We believe the legislation as it is currently drafted will struggle to achieve its original intent,” Meller said.
He said consumers would have to bear the additional regulatory costs but the reforms would hit the advice industry first.
“The initial impact will be on financial advisers, and even the [explantory memorandum] forecasts a halving of planner numbers in the next few years. We believe this could lead to losses of up to 25,000 jobs,” Meller said.
The total includes the loss of 8600 of the nation’s roughly 16,000 adviser jobs, as forecast by consultancy Rice Warner, and the loss of two support roles for every adviser.
“We also fail to see how this will improve advice access,” Meller said.
An inquiry led two years ago by PJC chairman Bernie Ripoll advocated greater access to financial advice for all Australians.
“Put simply, the legislation will impose a substantial burden on the advice industry we believe in the order of hundreds of millions of dollars without commensurate benefits,” Mellor said.
“The legislation is in danger of not achieving some of its fundamental goals, namely increasing the professionalism of financial advisers and making financial advice more accessible to more Australians.
“AMP strongly believes that, consistent with normal processes, a full regulatory impact statement should be completed before the legislation is enacted so that the impact on customers, the community, the planners and the broader industry is fully known.”
Opposition assistant treasury spokesman Mathias Cormann said the coalition agreed a regulatory impact assessment was required before FOFA became law.
“In fact, it would be reckless and irresponsible for the Parliament to proceed with this legislation unless a regulatory impact statement has happened,” Cormann said.
Cormann asked Meller whether he would regard the legislation as “competitively neutral’ and Meller said FOFA actually gave large companies such as AMP a competitive advantage because the costs involved in becoming compliant with FOFA were driving advisers to big organisations.
“So your view is that this legislation would lead to a consolidation of advisers into larger organisations?” Cormann asked.
Meller replied: “I think it’s undoubted and I think we’re seeing industry consolidation happening as we speak, which is people reacting to the fact that they’re seeing that they’re going to have to operate in businesses with lower cost bases that have to invest significantly in change.
“It’s much more cost-effective to do that under the auspices of a large organisation.”
He said FOFA and MySuper needed to be considered as a whole and 1 July 2013 was appropriate for both.
