“Increasing the SG will help build superannuation account balances to the levels they need in order to live in dignity in retirement,” AFA CEO Richard Klipin said.

However, Mr Klipin expressed concern about the second tranche of the Future of Financial Advice (FOFA) legislation introduced into Parliament yesterday.

“The financial advice profession has had to deal with a huge reform agenda in 2011,” he said. “And while the jigsaw puzzle that is FOFA is now becoming clearer, we must look at FOFA Tranche 1 and Tranche 2 in concert and assess whether together they truly deliver on the original strategic intent of FOFA – that is, increasing transparency and access in the financial advice market.”

Mr Klipin said the AFA has consistently called for, but has yet to see, any robust modelling on the impact and outcomes of the reforms on consumers and the industry. “Without this modelling it will be all but impossible to confirm whether FOFA can deliver on its promises,” he said.
Mr Klipin also said that despite three years of FOFA and PJC discussions, many pieces of the jigsaw are still missing.

Specific Concerns

1. Lack of robust modelling – the government must provide modelling which proves that FOFA legislation will fulfil its strategic intent
2. Insurance Remuneration – the government has created confusion with different insurance remuneration arrangements for inside and outside superannuation. This confusion will ultimately affect the take-up of insurance in an already dramatically under-insured population
3. Opt In – opt in will add three levels of costs: at the adviser to client level, the licensee level and the product manufacturer level. This will price advice out of the reach of many ordinary consumers
4. Projected loss of jobs for 6,800 advisers (as noted in the Tranche 1 Explanatory Memorandum – 13 October 2011) + staff + clients + communities – the costs to small business advice practices of implementing changes associated with FOFA will force many out of business resulting in tens of thousands of job losses. The market will be concentrated and consumers will have fewer choices in where they access advice
5. Lots of devil in the detail – the legislation as it currently stands is complicated and confusing for both consumers and the advice profession
6. Best interests duty – while the principle is sound, the AFA believes the devil will be in the detail. A best interests duty may also increase the cost of professional indemnity insurance
7. Start date of July 2012 is unworkable – implementation will take a considerable investment of time, energy and money. 

The AFA will be reviewing the proposed legislation more closely over the next few days in order to understand the full impact it will have on advisers and their clients.

“What we can say for certain is that the legislation is nowhere near ready for implementation in July 2012,” Mr Klipin said. “As with any major industry change, the success of FOFA will depend on how well it is handled. The industry will need to make a significant investment in terms of time, money and resources in order to get ready. Rushed implementation will only end in tears.”

The post Pieces of the FoFA jigsaw still missing but SG increase welcome appeared first on AdviserVoice.