Quality financial advice will need to trump quantity after FOFA
The servicing of A and B clients will dominate and financial planners will be kidding themselves if they believe they can adequately service unduly large client books in the new Future of Financial Advice (FOFA) environment.
That is the assessment of a number of industry players, including Adelaide-based consultant, Max Franchitto, who believes financial planners will face significant difficulty in convincingly arguing they can appropriately service more than 300 or 400 clients in any one year.
He said the advent of FOFA meant financial planners were facing a new paradigm in which the fees charged would need to more closely reflect the expectations of clients.
"The reality is that there are only so many clients you can look after efficiently and effectively," he said.
Franchitto also believes that in an environment where the industry super funds continue to agitate with respect to the value of advice delivered by financial planners, it will be important that planners deliver on client expectations.
"We are dealing with consumers who have been told some superannuation funds cost more because of commissions paid to financial advisers, so planners need to deliver," he said.
Sydney-based Australian Unity financial planner Andrew McKee agreed that the FOFA requirements would serve to impose physical limits on the number of full-service clients a planner could reasonably expect to handle in a 12-month period, but said insurance-related and other clients should not be overlooked.
"FOFA possibly will serve to reduce client loads a little, but it will depend on the type of client," he said. "Certainly, you're going to find financial planners focusing more closely on A and B clients."
Premium Wealth Management general manager Paul Harding-Davis said that despite the Government's FOFA objective of making financial advice more readily available and affordable, one of its consequences was likely to be taking full-service advice out of the reach of many people.
"You might almost say the FOFA changes are making full-service financial advice a little more elitist," he said.
Harding-Davis said overly large client lists were not common amongst financial planners within Premium Wealth Management, with most focused on maintaining longstanding relationships with their clients.
Franchitto said financial planners with a large number of fee-for-service clients would not be unduly impacted by the changes, but those who had large numbers of C and D clients would need to think about "getting rid of people at the bottom of the food chain".
"And realistically, they only have about five and a half months to get their act together," he said.
Recommended for you
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
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.
