Canny financial planners prepare for post-FOFA world
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Financial planners may well be resistant to the Government's two-year opt-in, but many are already putting in place the paperwork necessary to establish the arrangement with their clients.
Money Management has confirmed that numerous financial planners and a number of dealer groups have begun moving ahead of the Future of Financial Advice (FOFA) bills actually passing the Parliament to ensure they are ready to become compliant with the new regime.
Guardian Financial Planning executive manager Simon Harris confirmed that Guardian had already moved to assist its planners in ensuring they would be compliant with the new regime.
"It has been a case of planning for the worst but hoping for the best," he said.
Harris said Guardian had put a program in place to assist its advisers and to provide them with the necessary tools to handle the new regime, including pricing models and other collaterals.
"Some of our advisers have readily accepted the need to be prepared for the changed regime, others are taking a little longer," he said.
Premium Wealth Management general manager Paul Harding-Davis said that most members of the dealer group were ready to handle the new regime because they already had in place written client service agreements.
However, he said that those client service agreements had been modified to take account of the expected new regime, and would be utilised at each client meeting to provide rolling two-year approval.
"It is simple enough for the clients who regularly come in for face to face meetings but it becomes harder with respect to those clients who are harder to convince to come to regular meetings with their advisers," Harding-Davis said.
"We don't yet have a system in place to handle those clients in terms of first letter, second letter, third letter and the whole renewal process," he said.
Harding-Davis said that opt-in represented a considerable logistical challenge for those clients who did not regularly visit their advisers - and one capable of adding significant cost.
Harris also pointed to the costs involved in getting advisers ready to handle the new regulatory environment.
"We have already incurred significant costs but we are hopeful that the Government will provide a 12-month phase-in to help alleviate the immediate impact," he said.
Mercer's Jo-Anne Bloch agreed that existing client service agreements would serve with respect to meeting some facets of opt-in, but warned that the annual fee disclosure requirements contained in the FOFA bills represented a considerable challenge.
Matrix Planning Solutions managing director Rick Di Cristoforo said any adviser who regularly reviewed their Terms of Engagement and/or services with the client would likely be complying with the principles of opt-in.
"That is one part of Matrix's FOFA-readiness approach," he said. "However, the core issue is that the details of compliance with opt-in are unclear. How can any of us be sure until we see the final approved legislation?"
"Compliance with opt in is less problematic when the message/paperwork is prepared and signed off [in whatever form] on time, every time; the problem is when a subset of clients don't sign off, on time, for any range of reasons, that may or may not be because they are unhappy with their adviser or the fees," Di Cristoforo said.
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