Opt-in will come at a cost to clients

It appears that it will be the clients of financial planners who carry the ultimate cost of the so-called opt-in provisions likely to result from the Government’s Future of Financial Advice (FOFA) changes.

A survey conducted by Money Management in the wake of claims by actuarial firm Rice Warner and the Industry Super Network (ISN) that the cost of opt-in would be “negligible” revealed most planners thought it would add more than 10 per cent to their costs and that they would be passing on that cost to their clients.

According to the Money Management survey, 100 per cent of respondents believe the opt-in arrangements will add cost to their business, and 98 per cent of those respondents intend passing that cost on to the client.

However, it is the degree to which the planners believe the costs will impact their businesses that proved most interesting, with nearly 48 per cent believing it would add more than 10 per cent, while 25 per cent of respondents believed it would add more than 20 per cent to their costs.

Around 8 per cent of respondents believed the changes would add less than 5 per cent to their costs.

Although Money Management did not pose the question, a number of respondents said the implementation of opt-in arrangements would lead them to consider exiting the financial planning industry, while a number of others suggested that superannuation fund members should be asked to opt-in to their industry superannuation funds.

Treasury officials are understood to be putting the finishing touches to the first draft of the legislation evolving out of the FOFA proposals, which is expected to be made available to the industry in around a month.

While the financial planning industry has broadly opposed the annual opt-in arrangements being pursued by the Industry Super Network, some officials have suggested that a three-year opt-in arrangement might be manageable.