Roundtable acknowledges Industry Super Network's influence on FOFA

The Government’s decision to include an annual fee disclosure requirement in the Future of Financial Advice bill introduced to the Parliament last week was a direct result of the influence of both Industry Super Network (ISN) and consumer group, Choice.

That was the analysis of participants of a Money Management roundtable held this week which also acknowledged that a large segment of the financial planning industry had been effectively blindsided by the move.

The roundtable, which included Financial Planning Association (FPA) chief executive Mark Rantall, Association of Financial Advisers (AFA) chief executive Richard Klipin, Matrix managing director Rick Di Cristoforo, Premium Wealth Management general manager Paul Harding-Davis, Colonial First State’s Nicolette Rubenstein and Fidelity chief executive Gerard Doherty, will be published in an upcoming edition of Money Management.

However, there was unanimity among the panellists that the disclosure obligation – not flagged before the Corporations Amendment (Future of Financial Advice) Bill 2011 and tabled in the House of Representatives – would add significantly to costs for no great benefit to consumers.

Money Management understands that only a very few financial planning industry officials got wind of the Government’s 11th-hour move and had barely enough time to express their objections - which were ignored.

FPA chief executive Mark Rantall told Money Management in the wake of last week’s tabling in the Parliament he was in no doubt the complexity of the arrangement made a mockery of the Rice Warner research suggesting opt-in would cost as little as $11 per client a year.

“This requirement and the form of the documentation will drive it up to around $100 per client,” he said.

Assistant Treasurer and Minister for Financial Services Bill Shorten claimed in his second reading speech that the opt-in provisions contained considerable flexibility and that, consistent with what the Government had agreed in negotiations with the FPA and others, the renewal obligation would apply only to new arrangements after 1 July, next year.

However, the minister then dropped the bombshell by saying that while the renewal obligation would not apply to existing clients, the annual disclosure obligation would apply to all clients of advisers.

AFA chief executive Richard Klipin said he was in no doubt that the move had been inspired by the ISN.

“We have been left in no doubt as to the influence of the industry superannuation funds with respect to the shaping of government policy,” he said.

The round-table participants welcomed the fact that the Federal Opposition had undertaken to have the legislation referred to a Parliamentary Joint Committee.

Rantall and Klipin agreed that reference of the matter to a committee would provide an opportunity for the unintended consequences flowing from the bill, particularly the costs relating to the annual fee disclosure requirements, be closely examined and appropriately questioned.