Practices ready to act on grandfathering amendments
A significant number of financial planning practices are ready to take advantage of the grandfathering amendments to the Future of Financial Advice (FOFA) reforms after preparing for the changes in advance.
Radar Result principal John Birt said based on discussions taking place with advisory contacts that he was aware of more than 40 practices ready to respond to the grandfathering amendments to FOFA despite them being announced only days before Christmas last year.
Birt said that he had seen a number of practices beginning to move ahead with sales based on the 20 December announcement and that practices looking to sell their business through Radar Results had been receiving ongoing advice since July last year.
"All along, we have said it's nonsense, and the clients and the attached revenue could always be moved, but dark imaginings took hold and everyone froze. Unfortunately, a number of licensee groups used this negativity to scare their advisers into staying with their existing licensee," Birt said.
"The problem we had between July and December last year was the product providers being too cautious or scared to pay the commissions to a new licensee. I believe the legal advice that they had received was incorrect - but the safest option was to do nothing."
The grandfathering amendments were a relief, according to Birt, in that the grandfathering matter had now been clarified. However Peloton Partners principal David Murray said planners should not see the amendments as being 'FOFA proof' but 'FOFA lucky'.
"The planning sector had some impression that changes were coming and were waiting for it but the model about how clients seek and get advice still needs to change," Murray said.
According to Murray planners have been given an opportunity to work on the value proposition of their business but should not expect that the grandfathering amendments would provide them with a premium price for their businesses at time of sale.
"What has changed is that we have a line in the sand date which provides relief and that it opens the market for those selling a business - but planners will still need to tackle recurring revenues and conflicted remuneration."
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