FOFA's unintended consequences
The Government’s Future of Financial Advice (FOFA) changes to volume rebates may risk creating further conflicts between product manufacturing and advice, according to a roundtable conducted by Money Management this month.
Participants in the roundtable warned that the arrangements around volume rebates risked forcing medium-size dealer groups to simply change their business models and take on a manufacturing role.
This was something pointed to by the chief executive of Fidelity Investments, Gerard Doherty and the general manager of advice at Colonial First State, Marianne Perkovic (pictured).
Doherty said he believed the Government should have either allowed rebates to go through to dealers or stop them completely.
“By leaving it to platforms, [the Government] might simply make people change their business model to try and get their remuneration back to where it might be – which may be an unintended consequence – but I’d suggest that’s just going to layer up more costs,” he said.
Perkovic described the FOFA proposals on volume payments as still something of a grey area pointed to the fact that some smaller licensees were “coming out wanting to be product manufacturers because that’s the way they can handle that margin”.
“And if I was the Government or the regulator you’d look back and wonder whether that was the actual intent,” she said.
“Are we trying to change people’s businesses and then move from their core competency, which is advice, to now becoming product manufacturers?” Perkovic asked.
AUTHOR
Mike Taylor
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