The amended Future of Financial Advice (FOFA) compliance date has received a mixed response from some dealer groups as it does not change the fact there is still a lack of detail on the government’s reforms.
FOFA will commence on 1 July 2012 as planned, however, the mandatory compliance date has been extended to 1 July 2013, allowing for a 12-month transition period.
While it will ease some pressure around implementation, certain elements, such as the extent of fee disclosure and opt-in, volume rebates and grandfathering for platforms, are still unclear and continue to drive frustration.
Premium Wealth Management general manager Paul Harding-Davis told InvestorDaily the business had been ready for FOFA for some time.
However, there is an absence of clarity in some areas that will hamper key providers, which will affect dealer groups relying on those services.
“Software providers such as Coin, Midwinter and Xplan are likely to be crucial players in the logistical dimensions of opt-in and fee disclosure,” Harding-Davis said.
“The most logical place to capture that data is with a software provider, but we don’t know how granular the data needs to be [hence] they don’t know how to reprogram their software.”
Platform operators would also have to work around volume rebates and grandfathering arrangements, he said.
“The detail isn’t there to enable any of the platform providers to safely commence the new programming that they need to do,” he said.
Most dealer groups had thought FOFA through and were only waiting for further clarification, he said.
SFG Australia managing director Tony Fenning said given the detail on FOFA was still unknown, it was obviously necessary to delay the start date.
“On the flip side, the effect of taking so long to bring into place the changes to the law is adding to the general uncertainty and discomfort level in the market – it’s not helping,” Fenning said.
“It’s not a sigh of relief, if anything we’ve got to put up with uncertainty for a while longer, but hopefully not too much longer.”
Mixed feelings about the delay to FOFA were also felt by My Adviser managing director Philippa Sheehan.
“I understand there are a number of advisers across the industry that perhaps needs the time and I can support that,” Sheehan said.
“What I don’t support is the fact that things like volume bonuses and kickbacks are also continuing to that period. We need to clean up within [the industry] before we even start to discuss advisers transitioning. We’ve got to focus on removing any of these kickbacks that dealer groups do receive.”
My Adviser also wanted dealer group alignment to be made transparent to the public, she said.
Bendigo and Adelaide Bank senior manager of technical and research Julie McKay said the bank would aim to comply sooner rather than later for the benefit of clients, as they deserved to have FOFA in place.
MLC & NAB Wealth group executive Steve Tucker said the extension would minimise any disruption to advisers’ businesses and the service they provided to clients during implementation.
“We also need to provide adequate time for licensees and product manufacturers to change their systems and processes to support financial advisers with the transition to FOFA and implement the reforms in a seamless way,” Tucker said.
