Opt-in hurts planner sentiment

Nearly half of Australian financial planners expect their practices to be adversely affected by the Government’s proposed annual opt-in provisions for ongoing adviser services, according to new research released by Wealth Insights.

The Wealth Insights data, gathered in early May and covering around 500 planners, revealed that nearly half of those surveyed (47 per cent) believed the proposed opt-in provisions to come into effect from 2012 would have a ‘very bad’ or ‘bad’ impact and therefore result in a reduction in their business revenues.

The adviser research, conducted several weeks after the reforms paper was released by the Minister for Financial Services, Chris Bowen, suggested concerns about the impending changes had driven sentiment about the future outlook of the industry to levels lower than before the global financial crisis (GFC).

Wealth Insights managing director Vanessa McMahon said adviser sentiment looking out over the next five years had not improved in line with the market and was significantly lower than the five-year outlook recorded in December 2008, which was the lowest point of the GFC. This contrasts with earlier Wealth Insights data suggesting advisers were reasonably satisfied with the present state of their businesses.

The research showed that 47 per cent of respondents rated the annual renewal to ongoing adviser services as ‘bad’ or ‘very bad’, and this negative sentiment increased to 56 per cent for advisers who charged trail commissions. Some 38 per cent stated that the opt in changes would decrease revenues slightly, 12 per cent said they would decrease a lot and 6 per cent stated they did not know. Some 36 per cent of advisers felt there would be no change to their revenues, while 6 per cent stated it would actually increase slightly and 1 per cent said it would increase a lot.

While there has been much debate about whether or not there would be grandfathering provisions to protect trail commissions pre-July 2012, McMahon said the research asked how an annual opt-in requirement would affect advisers’ client base if it were to apply from July 2012, as touted by Bowen.

The research found that on average all advisers expected 20 per cent of their clients would not opt-in every year, and that increased to 29 per cent among advisers who charge trail commissions, while those who charge fee-for-service on average expect that 17 per cent would not opt in.

Considering the reforms in general, 31 per cent said their businesses would be worse off or much worse off, while a further 2 per cent stated they would probably close or sell their business. Some 39 per cent felt that the reforms would have no effect on their business, while 21 per cent felt they would be better off or much better off.