The Financial Services Council’s (FSC) proposed replacement business framework measures could have a negative impact on advisers and their clients, with Asteron Life, claiming steps should be taken to protect against its potential implementation.
The FSC’s framework is intended to be implemented on 1 July 2013 to coincide with the Future of Financial Advice (FOFA) reforms.
But there are concerns it penalises advisers and the ultimate impact will fall on consumers when financial planners move to recoup costs.
However Asteron Life said advisers should take steps to protect against any negative impact should the proposal be implemented next year.
“Advisers [should] to look at their portfolio and identify what mix they need to have to ensure they can sustain their remuneration. They need to make sure they get the right combination of new clients, as well as managing existing clients,” Asteron Life executive manager Mark Vilo told InvestorDaily.
He also noted that advisers should consider looking at different pricing models.
“They could consider, and I know some advisers already are, looking at implementation fees if there is a replacement business case going through. They could perhaps look at an implementation fee or an ongoing service fee, assuming that ongoing service is provided,” Vilo said.
“[Advisers could] potentially have a service level agreement where, in the event of a lapse occurring in the first two years, if the proposal is followed through the adviser can be in the position to recoup any lost revenue.”
But while some advisers are comfortable to have that conversation with their clients, many are not, especially in the current economic climate.
While Asteron commends the FSC for taking lead on the issue and is keen to be involved in improvements in the industry, it would like more clarification on the finer details.
“I think at this point the devil is still in the detail,” Vilo said.
“The recommendations at a high level are potentially workable, however there is a lot of discussion between now and when this is implemented. There is another level of discussion happening right now about it from a practical level.”
