Although the time to implement Future of Financial Advice (FOFA) reforms is well and truly upon us, there are still major "regrettable" reasons financial services companies are using to further delay implementation, according to an expert analysis.
One of those reasons is a belief that because a business has already moved to fee for service, FOFA changes will have little effect, according to Anthony James from PwC Management Consulting and Jim Boynton from King & Wood Mallesons lawyers.
"If there is one lesson to have emerged from all well developed FOFA programs to date [it] is how many different arrangements are potentially impacted by the conflicted remuneration or banned remuneration provisions," the pair wrote.
FOFA is impacting all parts of the value chain, from financial advisers and licensees to platform operators and product manufacturers.
An organisation that has any involvement with platform or custodial arrangements, clients in geared investments, provides any non-monetary benefit to financial advisers, receives any kind of rebate or commission, or pays or receives any volume-based payments, that business has a range of questions that need to be asked and answered, according to the paper.
"No business model we've seen – in any part of the value chain – has the luxury of turning a blind eye to the FOFA changes. A number of wholesale businesses have been surprised how FOFA impacts their businesses," the paper said.
Businesses were also waiting on the final shape of reforms but further Australian Securities and Investments Commission policy and regulations were "unlikely to be very relevant to many of the strategic decisions and will be of limited relevance to the bulk of the implementation tasks", according to James and Boynton.
Some businesses were also waiting to see what action their competitors took, treating FOFA simply as a compliance task rather than a strategic issue, or under the impression that there was still ample time to address the reforms, according to the paper.
Businesses that are treating FOFA as a strategic issue rather than a compliance task are progressing more effectively because they are more attuned to the "unintended consequences" of the reforms, while compliance programs can suffer from inertia as they await the final shape of the reforms, James and Boynton wrote.
"What the best prepared organisations are learning is just how long the process of designing and then implementing solutions which align to their unique strategic, cultural and customer profiles can be," they wrote.
"The bottom line is that the breadth and complexity of key strategic and legal questions posed by FOFA means there is no time to waste."
