Reaction mixed as FoFA docks in adviser space

The Financial Planning Association (FPA) has declared its members ready for the arrival of the new world order in financial advice reform, but others in the industry are less confident.

Mark Rantall, chief executive of the FPA said the organisation’s initiatives to support members in the lead up to the Future of Financial Advice (FoFA) reforms had been successful, with record numbers attending events held regionally and online.

“The FPA launched the Bulletproof Financial Planning campaign in response to research showing that over half of financial planners cited FoFA compliance as a main challenge,” he said.

“We believe, from the overwhelming attendance figures and positive feedback we have received from members, our members are in good shape to comply with their obligations under the FoFA reforms.”

While Rantall acknowledged that difficulties are always going to occur with such sweeping changes, he committed the FPA to supporting members throughout this process.

“ASIC has previously announced that it will take a facilitative approach towards compliance with FoFA for those planners making a genuine attempt to comply,” he said.

“We encourage members to continue to use the resources available to enable themselves to continue to provide best-practice advice to their clients under the new FoFA regulations.”

The power of a deep pocket

Advice services company Professional Investment Services also welcomed commencement of the FoFA legislation, with chief executive John de Zwart of the view that advisers meeting the requirements will soon justify the time and resources invested in them.

“Over the past 12 months we have redesigned our service model and processes, delivered training, education, a new advice and payment system, revised advice collateral and a range of online tools to ensure our advisers are ready for FoFA,” he said.

“It has very much been a collaborative effort, with advisers being involved at every step along the way.

“Our advisers are FoFA-ready and importantly, will also be able to grow their businesses by providing an even higher level of advice and service to their clients.”

De Zwart believes that Professional Investment Services and its network, as a non-institutionally owned dealer group, is well placed because its operating model more naturally aligns to “best interest”, a fundamental pillar of the reforms.

“We are ideally positioned to grow as financial planners and accountants seek the best home for themselves and their clients, where advice and product are not institutionally owned,” he said.

Taking this argument further, Synchron director Don Trapnell claims non-institutional licensees are vital to the health of the financial advice industry.

“We don’t buy the argument that conflicted advice will be ‘taken care of’ through the best interests duty,” Trapnell said.

“Consumers deserve to have access to advice that is not conflicted and if they are getting it from advisers aligned with an institutionally owned licensee, this may not be possible.”

Trapnell added that too many institutionally owned licensees have product manufacturer parents that control distribution via their own adviser force – a situation that isn’t going to change overnight.

“They are providing their advisers with financial incentives to support the parent’s products over other products in the market place,” he said. “This is conflicted remuneration in its rawest form. Those who claim that legislation will deal with it underestimate the power of a deep pocket.”