Intra-fund advice no panacea in FOFA fallout

financial-advice/FOFA/remuneration/parliamentary-joint-committee/chief-executive/financial-services-council/FSC/government/life-insurance/

24 January 2012
| By Staff |
image
image
expand image

The Parliamentary Joint Committee (PJC) reviewing the Government's Future of Financial Advice (FOFA) legislation has been told there is a real danger that it will fail to deliver on its core objectives.

The chief executive of the Financial Services Council (FSC), John Brogden, told a public hearing of the PJC in Sydney this week that while the legislation may succeed in minimising possible conflicted remuneration issues, it will not succeed in making financial advice more affordable.

What is more, he warned that intra-fund financial advice and scaled advice may not be sufficient to fill the void.

"While consumers' best interests will come first, advice will be more expensive, it will be delivered by fewer advisers to fewer Australians," Brogden said. "It would be a perverse outcome of FOFA if fewer Australians received advice because of these reforms."

The FSC chief executive also revealed modelling to the committee, suggesting a very high price for the implementation and maintenance of the new FOFA regime.

"I can advise the Committee that modelling based on data from the industry indicates that the cost of implementing the FOFA package in full will be $700 million," Brogden said. "This figure is based on what we know now in tranche 1 and 2, and obviously does not take into account further legislation yet to come before Parliament.

"I can further advise the Committee that the annual cost to the industry of complying will be $375 million," he said.

"Ultimately, consumers will bear the brunt of these costs as the price of financial advice increases. And worse, too many people will stop receiving advice or not seek advice because of the cost," Brogden said.

He said that while some had argued that intra-fund advice would be the solution to the increased cost of personal financial advice, this represented an "illusion".

"In this debate, it seems to have been forgotten that intra-fund advice only applies to superannuation. It does not apply to life insurance, debt, income protection, saving for a house, education and all of the other financial decisions and challenges people face," Brogden said.

"Intra-fund advice is the opposite of the spirit and principles of FOFA. It is distorted, it is conflicted, it includes hidden payments, there is no way to opt out, and it will reduce access to true scalable advice."

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months 1 week ago

A Sydney financial adviser has been permanently banned from providing any financial services, with the regulator deriding his “lack of integrity, trustworthiness and prof...

3 weeks 1 day ago

Minister for Financial Services, Stephen Jones, has provided further information about the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms....

2 weeks ago

One licensee has lost 27 advisers in the past week, now sitting at zero, according to the latest Wealth Data figures....

3 weeks 1 day ago

TOP PERFORMING FUNDS