FOFA opt-in figures don't add up for financial planners
Government claims opt-in would cost around $11 per financial planning client is at best questionable and, at worst, entirely misleading, writes Mike Taylor.
When the Assistant Treasurer and Minister for Financial Services, Bill Shorten, released the draft legislation making up the first tranche of his Future of Financial Advice (FOFA) legislation, he utilised research undertaken by actuarial consultancy Rice Warner suggesting opt-in would cost around $11 per client.
In doing so, the minister failed to acknowledge that the Rice Warner research to which he referred was actually commissioned by the Industry Super Network (ISN) and was premised on a peculiar set of criteria which have been strongly and persistently questioned by key figures in the financial planning industry.
On all the evidence available to Money Management, opt-in will almost certainly cost most financial planning practices a great deal more than the $11 figure arrived at by Rice Warner consistent with a brief provided by ISN. Indeed, Treasury officials many months ago conceded that opt-in could cost in the order of $100 a head.
Thus, one of the central planks of the Government’s FOFA approach is based on data commissioned to form the basis of a polemic, which is at best questionable, and at worst entirely misleading.
There were, of course, concessions contained in the draft bill with the Financial Planning Association, amongst others, succeeding in locking in Shorten’s undertaking that commissions would be allowed to continue with respect to individually-advised risk products in super, and with flexibility being granted around how planners actually addressed their opt-in obligations.
However, if it was ever Shorten’s intention to develop a draft bill capable of garnering bipartisan support, then he stumbled at the first hurdle by trotting out research inextricably linked to the political/commercial agenda being prosecuted by the ISN.
A few days later, the Government’s entire approach to financial services policy was indicated by Prime Minister Julia Gillard when she addressed a Financial Services Council (FSC) breakfast in Sydney. While Gillard’s speech did not break any new ground, it did confirm that her administration views financial services almost entirely through the prism of superannuation.
Gillard did not dwell on the broader question of financial advice, industry consolidation or bank dominance. Rather, she exhorted the financial services industry to support the Government’s pursuit of a Minerals Resources Rent Tax on the basis that it would then generate the funds necessary to support the lifting of the superannuation guarantee from 9 to 12 per cent.
She will find few people in the financial services industry reluctant to support a lifting in the superannuation guarantee, but many will reflect that viewing financial planning through the prism of superannuation will mostly serve to benefit the Government’s supporters in the industry funds.
AUTHOR
Mike Taylor
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