FOFA may pressure age pension
The Government's Future of Financial Advice changes could have the unintended consequence of placing more pressure on the age pension in future years, according to IOOF's Renato Mota.
Pointing to the latest bout of market volatility, Mota said regardless of the long-term nature of their superannuation investments, clients may judge an adviser's performance using short-term outcomes.
Mota said advisers would feel they need to justify to their clients why they should opt in to receiving advice for another two years, with clients looking to their fund performance and what an adviser has recommended over the previous two years.
"Advisers may be tempted to move their clients into more conservative portfolios to avoid the painful discussions that are likely to occur over a two-year term," he said.
Mota claimed this could have a negative impact, as more conservative portfolios would underperform over the longer term when compared to the higher growth portfolios that advisers would normally have recommended.
He said it was in these circumstances that one of the biggest unintended consequences of the two-year opt-in might prove to be that the Federal Government is liable for a greater pension liability in the future.
AUTHOR
Mike Taylor
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