In his time as an AFL player with Essendon, Brad Fox was involved in an altercation with Tony Lockett in which the recently appointed chief executive of the Association of Financial Advisers was choked to near unconsciousness in a headlock. While Fox was neither the first nor last player to come off second best in a stoush with Plugger, the experience can only stand him in good stead as head of an industry association battling sweeping change and muscular reform.
Fisticuffs aside, Fox will need to show that he is in the same league as his predecessor, Richard Klipin, as a negotiator and leader on policy.
In a wide-ranging interview with Professional Planner Online, Fox began by paying tribute to Klipin, calling his reign as CEO a “turn-around story from where we were seven years ago”.
Fox news, old news
Fox says his style will be more and that 2013 will increasingly see the AFA communicating directly to consumers.
Unsurprisingly, the AFA still supports the opposition’s 16 key changes to the Future of Financial Advice (FoFA) reforms, but Fox said his message to members was that it was time “come off the fence” and make the required changes.
He said that the AFA was in ongoing discussions the Australian Securities and Investments Commission (ASIC) on a range of issues and credits commissioner Peter Kell with taking a sensible approach to the FoFA reforms.
“I am sure they don’t like all the legislation, how it’s landed either in terms of what’s required to implement it. Because there are difficult parts but they have been extremely collaborative and should be applauded for it,” says Fox.
However, it may be AFA’s response to Consultation Paper 191 Future of Financial Advice: Approval of codes of conduct for exemption from opt-in requirement (CP 191) and the more formal Regulatory Guide 183 Approval of financial services sector codes of conduct (RG 183) that defines his initial leadership of the association.
“We have a strong view of where we want to land and we’re testing that with the market,” says Fox. “The debate around codes has started to lock in aspects that don’t belong in a debate about codes. For example, the desire to obviate the need for opt-in seems to be driving the code discussion. It’s like the tail wagging the dog.”
For the moment, the AFA view is that FoFA’s review of regulation has resulted in tough rules that should preclude the need for a compulsory higher standard.
“I would suggest that any adviser that is compliant with the law is sufficiently protecting consumer interests,” says Fox. “The step above that is the same as in any profession: there will be those who want to stand out above their peers and that’s a great thing, it’s great to have a competitive market.”
The AFA therefore takes the broad position that if the base level is the adviser adhering to the law, which ensures they are doing a better job of protecting consumer interests; then they are already professional.
“What we would like to do is take our members that are meeting the law and have them aspire to be a leading practice,” says Fox. “So, bring them up further than the law, but let them do it by choice.”
Multiple ways of approaching code
Under FoFA, an adviser who enters into an ongoing fee arrangement with a retail client after July 1, 2013, must give that client a renewal notice every two years. If the client does not agree to continue the fee arrangement or does not respond to the renewal notice, then the arrangement terminates.
ASIC has the ability to exempt advisers from the opt-in obligation if it is satisfied the adviser is bound by a professional code which ‘obviates the need’ for opt-in.
“There seems to be this foregone conclusion in the marketplace that the only way to have a code is to have an ASIC-endorsed code and that has to be comprehensive and include the parts to obviate the need for opt-in,” says Fox.
“These aren’t the facts though. You can have a code that’s not an ASIC-endorsed code. You could have an opt-in specific code that sits alongside it. So there are multiple ways of approaching this issue.”
Fox says advisers and licensees have not fully considered all the changes that will impact on their practices should they adopt a code that obviates the need for opt-in.
“If you are going to obviate the need for opt in under a code then its going to apply to all your clients and immediately from the date you sign up to the code whereas opt-in only applies to new client arrangements from July 1,” he says.
“So there is a vast difference in how fast your business is going to need to change, to modify to suit a code or to deal with opt-in. And then there is the nagging little piece in the background that if there is change of government, would opt-in remain?”
Fox says the AFA is close to confirming its position on codes and will make an announcement after their board meeting later this month. A new AFA treasurer will also be appointed, the position previously held by Fox.
