Late FOFA delay costs instos
{^YouTubeVideo|(url)http://www.youtube.com/watch?v=4ANGEM_mVOA&showinfo=0|(width)600|(heigh…^}
While the industry has welcomed the delayed implementation of the Future of Financial Advice reforms, the eleventh-hour nature of the decision has cost the big institutions money.
The Government announced on 14 March 2012 that the 'hard' implementation date for the changes would be delayed for one year to 1 July 2013.
ANZ general manager for advice and distribution Paul Barrett warned in early December that Christmas was the deadline for his organisation to start making changes to its systems in preparation for a 1 July 2012 start date.
"It has cost us money. For a number of weeks during and after Christmas we started coding systems and anticipating where things would end up," said Barrett.
"Most of our guesses were right, so it didn't end up costing us a whole lot in the end - but it had the potential to," he added.
IOOF general manager for distribution Renato Mota said there had been a significant cost for IOOF, and that it could have been avoided if the Government had announced the delayed implementation date before Christmas.
"A lot of the systems development has really occurred in the last three months. It certainly has made a major impact - we've had people punching away at computers, putting code in and developing the back end of the business," Mota said.
However, he added that the industry would be better off now that the implementation dates for MySuper, SuperStream and FOFA are all scheduled for 1 July 2013.
Colonial First State (CFS) general manager for product and channel development Peter Chun said "it would have been a bit of a mad scramble" to have everything FOFA-compliant by 1 July 2012.
The biggest challenge for CFS was trying to make changes to systems and processes based on draft guidelines and legal advice, he added.
"For various facets of the systems build we've made some key assumptions, and we would have been waiting on the final legislation to validate those key assumptions," said Chun.
Matrix Planning Solutions managing director Rick Di Cristoforo agreed that implementing opt-in and fee disclosure systems in particular was problematic without legislative certainty.
"If you're a programmer you can't really program until you know exactly what the law looks like," he said.
It may not even be possible to implement annual fee disclosure for existing clients by 1 July 2013, since the data may not exist in an efficient form on the product provider end, Di Cristoforo said.
MLC could not be reached for comment by the time Money Management went to print, and a spokesperson for AMP said it was too early to comment on the implementation costs related to FOFA.
Recommended for you
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
The Senate economics legislation committee has recommended Schedule 1 of the Delivering Better Financial Outcomes legislation be passed as it is a “faithful implementation” of the recommendations.
Treasurer Jim Chalmers has handed down his third budget, outlining the government’s macroeconomic forecasts and changes to superannuation.
