Provocative polling by industry super funds
Mike Taylor writes that the recent Industry Super Network-commissioned surveys about opt-in only serve to distract attention from the reality of the changes: they will increase the cost of advice.
Timing can be everything when lobbying the Federal Government. Thus financial planners should not have been surprised to see the Industry Super Network last week ramping up its campaign to have an annual opt-in imposed on financial planners.
The efforts of the ISN, verbalised by its chief executive, David Whiteley, came in the form of a specifically commissioned survey by Newspoll, which found that nearly 75 per cent of respondents favoured annual renewal of ongoing fees.
This was followed by the commentary about research conducted by actuarial firm, Rice Warner, which suggested that the cost of opt-in would be negligible.
Putting aside the question of how much the ISN has spent on commissioning research and where that money actually comes from, the bottom line is that the timing of its release comes just weeks ahead of Treasury making public the first exposure draft of the Future of Financial Advice (FOFA) legislation.
Given the degree of industry consultation that has taken place concerning the FOFA proposals, it seems most unlikely that the Treasury officials would have been unduly influenced by Whiteley’s most recent efforts.
But they must surely have raised their eyebrows at the use of the element of the Rice Warner research equating the cost of opt-in to one-hundredth of 1 per cent of funds under advice.
Given the different business models utilised by financial planners, differing locales and consequent differing business overheads, the use of the Rice Warner research can only be described as a provocative distraction.
Following the use of the Rice Warner research, Money Management conducted its own minor survey to determine what readers believed opt-in would ultimately cost.
Not unexpectedly, the results differed markedly according to the type of financial planning practice and the client base. Planners without significant revenue flowing from trailing commissions felt they would be least affected.
However, not one respondent suggested that opt-in would come at no cost to financial planners — with the majority suggesting it would add in excess of 10 per cent a year to their operating costs.
Perhaps just as importantly, 100 per cent of the respondents said they would be passing the cost on to their clients.
As insignificant and unscientific as the Money Management survey may have been, it carries an important message for the Assistant Treasurer and Minister for Financial Services, Bill Shorten: his Government will be labelled with having increased the cost of financial advice for many Australians.
AUTHOR
Mike Taylor
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