The Association of Financial Advisers (AFA) has just completed its national roadshow – a six-state tour to 1350 delegates, including 220 master class participants.

Across the country, members asked me two key questions. The first was: “I have FoFA fatigue, isn’t it time to shift the focus beyond FoFA?” And the polar opposite question was: “After months of debate, isn’t it time to up the ante on the FoFA debate?”

So it got me thinking. Both questions are the right ones to be asking. It’s time to shift the debate way past FoFA. It’s time to debate the real issues at hand, and demonstrate that financial advice needs to be at the core of the Government’s policy agenda. We need a cohesive national plan to lift the two in 10 people who seek financial advice to seven in 10, and this will take clear leadership and hard work. It sometimes seems like we have been talking about Ripoll and FoFA forever.

But if this were the grand final of a football game, we are now at half time. We are about to enter the third quarter – considered by many to be the “premiership quarter” – and there is still the contentious issue of “opt in” to deal with.

The recent announcement by the Minister for Financial Services and Superannaution, Bill Shorten, that the Government may be rethinking a ban on risk commissions within superannuation is welcome.

The key issue that seems to have resonated with Minister Shorten is advised versus non-advised superannuation. This surely implies that advice is the issue rather than the product structure, be it individual or group-based.

The AFA believes that on the issue of opt in, the Government has got it wrong. The current global market jitters serve as a timely reminder of why opt in is such poor policy. In a world where opt in exists, the only “advice” consumers will be able to afford will be call centre advice offered by operators who have not had the training, experience or education to cope with market crises or the ability or authority to offer advice on complicated matters.

The AFA believes opt in will introduce three tiers of cost, which will ultimately be passed on to consumers.

1. The data around the market-place suggests the cost to a financial advice practice of delivering opt in is about $100 per client. The AFA believes this estimate is a little low because, along with the cost of the adviser and staff time in documentation preparation and completion, there will be costs associated with additional time in client meetings. These meetings will be about advisers re-establishing and re-articulating the purpose of the relationship with their clients – something they will want to do because so much is at stake.

Suggestions put forward by the industry funds movement that all opt in requires is for the client to “sign a piece of paper” and that the cost is therefore approximately equivalent to the cost of a cup of coffee and a muffin – $5 to $10 – are obviously nonsense.

2. Licensees have a responsibility to supervise and monitor their advisers and will therefore have to ensure that their advisers run the opt-in process appropriately. What will this mean? Will they need to audit the process? Will they need to see every client’s signature? What will that cost the licensee and, ultimately, the client?

3. Opt in is essentially about remuneration. Those clients who opt in agree to keep paying their advisers and those who don’t, don’t. From a product manufacturer’s point of view, this means they have to know when to turn the tap on and when to turn it off. To put systems in place to handle and administer opt in for hundreds of thousands – if not millions – of clients, is going to be a very, very expensive business. Once again, these costs will ultimately be passed on to the client. If the underlying Government concern is consumer protection, then the solution to opt in is to strengthen the opt-out requirements. The challenge is to make the opt-out provisions within those documents clearer and easier for consumers to understand.

As we enter the premiership quarter of the FoFA debate, we cannot let what looks promising on the commissions front blur our vision around opt in.

However, beyond this occasionally insular FoFA debate we do collectively need to focus on the real future of financial advice that lies way beyond July 1, 2012 and get into the hearts, minds and futures of the Australian community in a more meaningful way.

This is our challenge and this is our opportunity.

Richard Klipin is chief executive officer of the Association of Financial Advisers (AFA).

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