The Future of Financial Advice (FoFA) reforms are now less than three months away, but one expert warns that being “consumed” by the changes is as dangerous as being underprepared.
Speaking at the van Eyk annual conference last week, Matthew Fogarty, national practice development manager for The Encore Group, said “the horse has bolted” as far as being FoFA-ready was concerned and advisers should be looking well beyond the July 1 start date.
“It is now about a new horizon and where we go to from here in terms of FoFA readiness,” he said.
“For many, FoFA, has been all-consuming and it is wearing a lot of people down, but the point is that we haven’t even hit the start line.”
Fogarty said the notion of best interest is already at the heart of what most advisers do, but added that the industry’s “perception problem” would be addressed by the reforms.
Regulation revenge
However, this does touch on an underlying problem.
“At the moment we have the Australian Securities and Investments Commission (ASIC) regulating what we do. That’s not what other professions do; they regulate themselves. You see that in accounting, you see that in the legal profession and you see that in the medical profession,” he said.
“Unfortunately we’ve let things get away from us and, regretfully, we are paying the price.”
If nothing else, Fogarty says FoFA has been a catalyst for practices to look at how they engage clients and implement business models, which may yet alter how consumers perceive the industry.
Dearth of data
However, he has concerns over how some in the industry are interpreting elements of FoFA.
“I hear a lot of people say that they aren’t worried about fee disclosure statements because it is just a process,” he said. “Yes, it is a process but what drives the process at practice level is having good quality data. And therein lies part of our problem.”
Fee disclosure statements apply to both new and existing retail clients who receive personal advice and enter an ongoing fee arrangement. These must be provided annually within a 30-day period from the disclosure date for the previous 12 months and must provide: the amount of the fees paid by the client; the services the client was entitled to receive; and the services that were provided.
“How many of us at a practice level have such good systems that we can accurately track what services were provided? This is where the heavy lifting has to be done. It’s not just about the process of it and it’s actually a massive piece of work,” said Fogarty.
