I'd like to really tell you what the 'F' stands for in FOFA (Future of Financial Advice) reforms. But that's not professional. It's taken a year of debate around reforms intended to "ensure more Australians have access to high quality and affordable advice", yet the latest round of adjustments seem to move further away from the commendable original intent.
AFA CEO, Richard Klipin said, “the FOFA rhetoric has not been matched with strategy and consumers have been hung out to dry.”
How so? In two key ways -
  • A prospective ban on up-front and trailing commissions for both individual and group risk products within superannuation from 1 July 2013
  • A prospective requirement for advisers to get clients to opt-in (renew) their advice agreement every two years from 1 July 2012
There's an old adage that states, life insurance is sold, not bought. This is clearly evidenced by the significant under-insurance levels in Australia. The amount of advice and work that I do for my clients to implement a sound risk management package would be totally undermined by the banning of commissions on risk (in super). Clients are unlikely to want to pay for my advice and then pay a life insurer a premium for the cost of cover. Does the government think the insurance companies will significantly reduce their premium rates if they don't have to pay commissions? Ha! Premium rates are calculated on a broad range of factors and commissions make up a small proportion of the cost.
On the issue of opt-in, Mr Klipin said ..."we believe opt-in is bad policy. It devalues the long term nature of the relationships consumers have with their advisers and increases the adviser workload which, again, pushes up the cost of advice."
When it comes to politics and standing up for ones rights, while I have opinions and I'm not afraid to voice them, I tend not to announce it. I've always believed that whatever happens in politics won't directly impact me or my ability to earn a living. This is no longer the case as these reforms will have a significant impact on my business.
Is "opt-in" what consumers want? Have your say by clicking here.