We hear a great deal about The Future of Financial Advice, which by its very nature is forward- looking but what about the besieged present, given yet another round of changes?
It’s hard to tell as the professionals, whose expertise is around figures and the future, seem to disagree so basically about the costs to both consumers and industry of every incarnation of FoFA.
According to Mark Rantall of the Financial Planners Association in media reports the added costs of compliance with the return to the old FoFA add up to $270 million a year which could be passed onto consumers. Yet Industry Super Australia, arch rivals in the FoFA debate, commissioned a report by Rice Warner this year which showed consumers could be hit with extra costs of the just dumped regime totaling $533 million pa.
If there was consensus, and understanding, about the numbers consumers could be forgiven for celebrating the return to the original legislation. It was just as they were getting their heads around what FoFA might actually mean, in terms of an ASIC register and the Cormann ‘reforms’ of the legislation, most bets were off.
And it ain’t over yet there’s more talk and change to come and it’s about the one thing most sides seem to agree is needed. Senator Xenophon, who helped broker the so-called ‘coalition of common sense’, which disallowed the regulations which were ‘reforms’ to the laws, says he’s happy to negotiate further.
Which maybe just as well with various industry bodies and planner groups labelling the outcome would create “mayhem and turmoil’, was “unworkable”, will make advice unaffordable and create ruinous legal uncertainty. But what about the consumer side, what is the customer meant to make of the return of opt-in and fee-disclosure and a tighter stand on best interests and conflicted remuneration?
It’s not unreasonable to assume another round of argument about what these terms really mean and what they do and do not achieve may drive even more to procrastinate and sit on the wall at no little cost until someone cries ‘peace’.
In all the complexity and submissions one set of figures stand out. It comes from the Financial Services Council submission - research commissioned from KPMG Econtech showed those who took advice saved an extra $1,590 p.a., after the cost of the initial advice against a similar person without a financial adviser.
“These savings equated to an additional $91,000 upon retirement for a 30 year old Australian,” said the submission.
So there’s a real cost to be considered by doing nothing or worse by taking advice from those who have little or no expertise. Of all the figures bandied about the continuing cost of not engaging or trusting financial advice is a significant one. It’s one area all sides seem to agree about but for which we don’t yet have an answer they can settle on.