'Opt in' and intrafund advice remain bones of contention

Advisers remain concerned about the ‘opt in’ for continuing advice and intrafund advice reforms — two issues that led to impassioned remarks from panel speakers at a Financial Planning Association (FPA) lunch on Friday.

Paul Barrett, general manager of Colonial First State’s advice business, said that when it came to the ‘opt in’ reform, the Government was trying to solve the problem of passive income — something that ultimately did need to be solved. However, he felt that it was overkill in an environment that would see the introduction of statutory fiduciary duty, a ban on commissions, and agreements between clients and advisers on fee charges that could be stopped at any time.

He added that ‘opt in’ went against the idea that financial advice was a long-term issue.

“The benefits of advice manifest over many years. To have an annual or two or three-year ‘opt in’ is not an appropriate situation,” he said. “In my view, this is another example of shifting risk to households.”

He also questioned how fiduciary duty would operate in an ‘opt in’ world.

“Where does fiduciary duty begin and where does it end?” he asked, questioning what happened when clients had not paid for advice.

Shadforth Financial Services’ chief executive, Tony Fenning, said that while the issue did not affect his company too much, and while the issue of payments for no service had to be addressed, he felt it was “heavy-handed regulation”. Fenning doubted whether many of the reforms would address the root cause of the problem that led to the circumstances around the Storm Financial collapse, for example.

Fiducian Portfolio Services managing director, Indy Singh, however, felt ‘opt in’ was a positive reform because it would force the review of a portfolio, adding that advisers who practiced in an ethical way should not have a problem.

“It’s those that don’t service their clients, and who don’t provide appropriate advice, that would have an issue when the client is required to ‘opt in’,” he said.

Singh, however, had a serious contention with intrafund advice.

“I think what’s really wrong is the interchangeability of the word ‘advice’. What they are really offering is more like intrafund information about the product or about superannuation legislation, or, if you take it a step further, intrafund information about why you should keep your money in their fund,” he said.

“We give advice, they give information. Advice can’t be half-baked, or half-pregnant.”

Barrett said that while there was a greater need for limited advice, he did not agree with expanding the intrafund advice regulations to cover complex topics.

Fenning worried that it would result in half-witted advice and questioned whether, in a fiduciary duty environment, a poorly performing super fund would be required to advise that members go elsewhere.