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Ramifications of the proposed FOFA changes to advice

08 Nov 2010
From

Greetings

Thanks for the feedback on the AFA advertising initiative.

Like many practioners I am trying to work through the potential ramifications of the proposed FOFA changes to advice. While the politics of market share behind these proposals are easy to understand the economic ramifications are very serious with several takeovers from overseas  interests of iconic Australian Company’s underway and others in the pipeline. The current regulatory uncertainty has all but stopped investment and recruitment in the advice sector at a time when Australians should be benefiting from improving market sentiment. This has a very eerie resemblance to similar issues in the mortgage market which led to reduced competition due to the squeeze and ultimate collapse of the smaller independent providers.

In our practice we service around 1500 clients of very varied needs and circumstances. Our top clients pay fees by cheque and have in excess of $1m to invest; our middle clients pay by adviser fees and brokerage via Wraps and Corporate Super Plans, while our poorest clients are attended to on a loss basis for help with budgeting and  Centrelink.  A number attend a Soup Kitchen we support in our local community on a Monday night. Where appropriate clients have a service agreement with us which they cancel on 30 days notice which provides a fair and competitive environment for us  and for clients to retain control of the payment process.

I have always believed that advice should be available and affordable to all Australians and that Advisors should not just pick the most profitable clients but provide a wider service to the whole community  and in particular the weak and vulnerable. The proposed changes would eliminate this with Advisors forced to manage a smaller client base with a stricter client qualification criteria. The very people who need help will then be left to fend for themselves and become prey to unlicensed advisors and property spruikers. The number of working families with access to ongoing advice from qualified advisors would substantially diminish.

I have  observed firsthand the absolute chaos a similar approach caused in the UK, my country of birth. There three of the four major banks are affectively controlled and owned by the Government and the Advice Industry has ceased to function efficiently I only hope that we learn from this and that wise heads can prevail over political imperatives. The real issues of an ageing workforce who need stable income in retirement is far more important than mindless undermining of the industry by certain vested interests.

Let me know what you think I’m off to help at the soup kitchen tonight.

Till next time

Tony

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