Industry Superannuation Network chief acting executive Matthew Linden said the details of the legislation have been known “for a long time”.
“No doubt all of them will be making efforts at the last minute to make sure they’re fully compliant,” he said.
“We’re confident there’s been enough notice given about the impact of the reforms, what they mean, and how practices will need to change,” said Mr Linden.
He added that research conducted by Rice Warner Actuaries on behalf of the ISN suggests the reforms will be “overwhelmingly positive” and “will put downward pressure on the cost of financial advice”.
The new regulations will open up many new business models for advisers, said Mr Linden – particularly when it comes to scaled advice.
“[Scaled advice] is an exciting opportunity for many in the financial advice industry to be in a position to provide advice to more Australians – provided it’s affordable,” he said.
There are amendments in the Stronger Super bills, passed on Monday, which are designed to provide more certainty around the provision of scaled, or ‘intra-fund’, advice, said Mr Linden.
“With scaled advice there are often instances where there may be personal advice required, [in which case clients are referred on to a personal advice provider] – and that falls under the auspices of the new FOFA rules,” said Mr Linden.
i See K Krudd is now making it hard on the unions and trying to disable their powers, wonder how this will affect the 100s of millions the ISN/Unions use for their political purpose.
Extra regulations just help push advisers into taking shortcuts, e.g I rarely do ROAs any more….just detailed file notes. I figure clients don’t read or understand SOAs so why would they bother reading all the crap on my ROA, as long as I’m not charging extra fees or changing the risk profile. Our new streamlined SOA is still over 40 pages not included projections or research attachments. Thanks legal team….as least your job remains safe.
Meanwhile back at ISN HQ
ISN HQ: “What’s happening with those evil Financial Planners”
ISN Minion: “We had the CEO of CARESUPER, criticise Financial Planners about Self Managed SUper Funds” But its backfired. Those evil FP’s are helping their clients even more, with strategies, investing, and giving good advice, and we don’t give advice”
ISN HQ: “Damm what are we going to do now? The FOFA trick has slowed them down, but now they are going to give great service and improve even more. what are we going to do?”
ISN Minion: “But Sir, We have still got Shorten and the unions”
ISN HQ: “That won’t work. Shortens taking over from Rudd after the election and the unions get a share of our fees so they wont say anything” I know we shall introduce our own ADVICE services, to fool the dumb investors”
ISN Minion: “But what about the Best Interests rule”
ISN HQ: “As long as the money stays in the ISN funds how can it not be in our Best interest, hehehe!
steve, how very true you would have to be a lunatic to buy a FP book now
For sale : Financial Planning practice with the following features –
– Hundreds of clients who can opt out anytime. – MASSIVE compliance & paperwork burden. – HUGE running cost. – Unknown & unpredictable future income. – Industry that will constantly attack you & blame you for the bandits that MAY exist or pop out. – Industry & Government bodies who label you a BANDIT at every opportunity to forces education courses down your throat & appear to be fixing problems. – Rising litigation that you will lose 95% of the time and have no right to defend yourself at all. – Your life will be spent chasing your tail trying to exist and fend off compliance LEECHES working 6 to 7 days a week but still getting no where. Still interested?? Just make me an offer…..PLEASE!! The 3 times book has been destroyed, i would be extactic with 1x book!!
http://thedunnthing.com/
A lot can be learned from spending a couple of hours reading his blogs.
His strategies are leading edge, maybe a tad too close to the line for some FPs.
I understand that many FP could not follow some of them as they are ‘tied’ in what and how they can advise, but for the truly independent adviser it is worth the read.
ISNs have their place, for people that want hidden fees and amounts less than say 10k. They can fill in a one pager, send all their reps out to audiences, not give FSGs and adviser profiles. Hand out choice forms more than salmat delivers brochures into our letter boxes. They have their place, not so sure about them delivering any other type of solution yet. So their you go, lets implement that strategy so we can work together and keep the ISNs scaled advice to amounts less than 10k. Then from little things big things grow.
[quote name=”Steve-jj”]’I would want an advisor to consider things that I haven’t considered. If the client dies a disclaimer won’t make anyone better off. Most planners don’t charge for the initial “discovery” meeting anyway, so where is the harm?’
That’s because you don’t want to offer scaled advice – no problem, your call, but don’t bad mouth those that are happy to do so.
Why not read Dunns blog – he is probably one of the best FP training guys out there.[/quote]
Where do I find this blog?
By the way, I have no issues with scaled advice at all. It is just that the client has to request the scale and the client doesn’t know what they don’t know. I’m grappling with this myself at present, and how to do it properly.
‘I would want an advisor to consider things that I haven’t considered. If the client dies a disclaimer won’t make anyone better off. Most planners don’t charge for the initial “discovery” meeting anyway, so where is the harm?’
That’s because you don’t want to offer scaled advice – no problem, your call, but don’t bad mouth those that are happy to do so.
Why not read Dunns blog – he is probably one of the best FP training guys out there.
plonker
Plonker:
the term plonker started out as a reference to someone who was forever drunk on cheap wine (cheap wine is nicknamed plonk) this person was usualy a homeless person, or poor person.
I don’t drink cheap wine than you! Nothing less than $5 a bottle.
[quote name=”Gerry”]Okay…I need some answers/opinions on a real case.
Accountant recommends client do SMSF to gear into property. Client will also rollout of industry super funds to do this. The lender needs client to sign a letter saying they have received an SOA before they do the deal. So…the SOA requirement is passed onto me (an adviser)….but I didn’t recommend the strategy. Moving on, the strategy is okay and i’ll put the onus back on the client and accountant saying they discussed and agreed on the strategy and I am just giving the nod of approval or something like that. Scaled advice?
Now…what about insurance? There is gearing involved and they are rolling out of some super funds that may or may not have life cover. Where does my duty of care finish?[/quote]
I’d run away from that!
[quote name=”Steve-jj”]B Real – don’t be a plonker mate.You can give scaled advise with all the disclaimers you want about it not dealing with life insurance. Maybe a little more thought in any reply.[/quote]
Hi Steve
Maybe I am a plonker, (what is a plonker?) but at least I understand the role an advisor plays, where I don’t think you do. I also understand the liability if planners don’t get it right – a moral liability and a requirement to act in the best interest of the client.
Your example was just ridiculous. Of course advice around a PA does not necessitate advice around investments. Maybe an understanding of what planners do and some thought on your part might help too.
I would want an advisor to consider things that I haven’t considered. If the client dies a disclaimer won’t make anyone better off. Most planners don’t charge for the initial “discovery” meeting anyway, so where is the harm?
B Real – don’t be a plonker mate.
The tyre changer would tell the customer that they should get their brakes checked / fixed. This is a standard business model – the up sell. However the tyre changer does not insist that you have a full service at the time of booking you in, do they?
You can give scaled advise with all the disclaimers you want about it not dealing with life insurance. If you had any commercial savvy then you would have a standard letter outlining other areas you can assist with.
Maybe a little more thought in any reply.
‘Thought provoking, but I think your talking about ongoing service packages, not ongoing advice?’
Have to ask you – what is an ongoing ‘service package’ if there is no advice?
Does one really expect a punter to pay thousands of $ each year for some newsletters (often a cut and paste from other sources), and a ‘review’.
Serious Q – if circumstances have not materially changed then what is the service package offering? I’m sure a simple on-line form would alert if there is a change in circumstances, so even the review is a tad ‘fluffy’.
With some smart software systems so much of the review can be automated.
Watch this space – sooner or later a cloud based system (free to the punter) will be launched that would cover probably 50/70% of the punters with simple ‘standard advice’.
[quote name=”Steve-jj”]’If a provider of scaled advice has ‘ignored’ a potential issue then surely this has a major conflict with the best interest duty.’
Not so. If scaled advice is to answer a punters question about POA for health issues then the FP has no liability for investment advice. Pretty simple really.
As Dunn said in his blog, if he wants a tyre changed he does not want to be charged for a full service, and a retainer for same.
I’m sure you can work out scaled advice without too much effort if you wanted to.[/quote]
What is you were to change a client’s tyre and at the time noticed that their brake pads were worn out. Should you just ignore that and let them die?
Okay…I need some answers/opinions on a real case.
Accountant recommends client do SMSF to gear into property. Client will also rollout of industry super funds to do this. The lender needs client to sign a letter saying they have received an SOA before they do the deal. So…the SOA requirement is passed onto me (an adviser)….but I didn’t recommend the strategy. Moving on, the strategy is okay and i’ll put the onus back on the client and accountant saying they discussed and agreed on the strategy and I am just giving the nod of approval or something like that. Scaled advice?
Now…what about insurance? There is gearing involved and they are rolling out of some super funds that may or may not have life cover. Where does my duty of care finish?
[quote name=”jason”]On ACA last night,
I feel we will see more of these really sad stories come out as ISN network together with Shorten’s Government try to simplify advice and wipe planners out.(Comment shortended to fit text)[/quote]
Excellent comment and highlights an issue with scaled advice. If this client came to see you to get advice about investing say $50k into Australian Shares, and their past investment history plus risk profile backed this up, you could/perhaps would, scale the advice to investing the $50k. You would have no obligation (since 1/7) to look further and therefore may well overlook the fact that the client does not have adequate insurances?? It would however be cheaper for the client……….
On ACA last night, personally i dont like the show, however a very damaging report to Hesta- from little things big things grow, well a small issue has turned out to be a big issue. A client with a terminal illness, didnt receive the correct advice or no advice like most ISN and well yes you have it. Hesta just wont help. If the client had seen a adviser that client now would probably have received a trauma payout and terminal illness benefit from appropriate advice. I feel we will see more of these really sad stories come out as ISN network together with Shorten’s Government try to simplify advice and wipe planners out.
[quote name=”Steve-jj”]Would that be the scaled advice, of Silver, Gold or Platinum with corresponding fees of $4k, $8k, $12K PA, of are you offering true scaled advice to meets the specific request of a client.
A genuine Q, as so many planners just want to pigeon hole into a preset package deal, and that is not scaled advice IMO.[/quote]
Thought provoking, but I think your talking about ongoing service packages, not ongoing advice? If a clients circumstances change you must provide advice (scaled advice(. I might be missing your point but your comment has me thinking about our ongoing service and if in fact, in some circumstances it is ongoing advice. Good comment, if not just a little bit confusing.
So many opinions, so little unity…….. But obviously, that’s just my opinion……
‘If a provider of scaled advice has ‘ignored’ a potential issue then surely this has a major conflict with the best interest duty.’
Not so. If scaled advice is to answer a punters question about POA for health issues then the FP has no liability for investment advice. Pretty simple really.
As Dunn said in his blog, if he wants a tyre changed he does not want to be charged for a full service, and a retainer for same.
I’m sure you can work out scaled advice without too much effort if you wanted to.
The ISN have a much bigger problem than SMSF. That is with the advent of FOFA and the new fee structure being applied to retail funds is that the net cost of retails funds are the same as or cheaper than Caresuper or most ISN’s. so an Industry Fund is the same price as say retail funds but a retail fund comes with an well qualified, educated, experience, adviser focused on the clients best interest, then the clients are looked after. The ISN are at a massive disadvantage now because they don’t provide advice,
Lincoln, it always counts, you will be burned at the stake and your children sold into slavery……unless you are an ISN call centre flunkie then it’s just fine!!
I don’t understand how scaled advice will work together with best interest.
If a provider of scaled advice has ‘ignored’ a potential issue then surely this has a major conflict with the best interest duty…. or doesn’t best interest duty count when intra-fund/scaled advice is provided?
Marcus, your comments are not related to the story. Don’t try and hijak the thread.
Somewhat off topic Marcus…
Of course an Accountant is putting his client first when he recommends an SMSF when a Wholesale fund, Wrap account, or even an Industry Fund, may do a better job at a lower fee?
The accountant would never consider the ongoing fee revenue from a SMSF client would they?
Good advisors have been acting in the best interest of their clients for years and have no need to unwind existing conflicted arrangements as in many cases no conflicts exist.
Is this guy an idiot? some of the details still have not been finalised and even in his own words one of the bills passed on MONDAY provided more clarity around the provisions of scaled advice… on MONDAY!!!!
This guy is a joke
[quote name=”marcus wigan”]..[/quote]
Marcus, your comment seems completely off topic to me. This is not a discussion about the matters you raise.
Many advisors have been working in a non conflicted manner for many,many years; charging transparent fees and using wholesale products, etc. I.e. acting in the best interest of their clients.
Really, what is conflicted remuneration at the end of the day? Could you not argue that an accountant who recommends an SMSF to their client in the knowledge that this represents a source of annual fees (when a wholesale super account would have been less expensive and more appropriate) is conflicted?
Enough planner bashing from people who don’t understand the real world of financial planning, in my opinion!
Mr Linden, The financial planning industry only found out about the extent of the conflicted remuneration legislation when it was released in late april. You are so out of touch with the mammoth effort undertaken by all IFA firms at great cost both personal and financial. I am looking forward to a enquiry into the massive fees earned by ISN and their cronies and where those fees ultimately end up (ie in unions hands or in the hands of a greedy few).If you work out how many people are in ISN and then work out the fee take where does the money go if its not paid to financial advisers?
Marcus, Not sure if you are aware but the much, and rightly maligned, commission only, non review/no service planners get off largely scott free from the current compliance burdens being dumped on small business.
Also if you are in an insto and recommend nothing but insto product, you similarly will not have much to worry about. There’s enough product margin in their high fee integrated products to fund all your compliance needs.
It’s just dumb schmucks like me that invest in direct shares, TD’s and wholesale managed funds for our clients that are getting screwed by this stupid legislation.
We don’t have the high fee margins built into products like industry and retail funds, our clients have always had lower management fees.
What makes me and others angry is the misrepresentation, lies and ‘looking after their mates bias’ against us. Hypocrisy is hard to swallow, especially when the actions are morally bankrupt and favour the big guys.
Marcus, I believe from the comments most advisers, like myself, are not in an institutional framework, ISN or big bank/insto. This is where the problems lie. I have been fee for service for more than 10 years by direct debit to the bank account, if we use funds they are generally off platform direct wholesale no entry fee, no trail, no conflict.
I am not against the stated thrust of the reforms, the implementation is amateurish. Some laws that start Monday were passed in the last week, sorry I’ll just pop off, figure out what they mean, re-engineer business structures, train my staff, collect and enter the data and then be ready implement next week. Give me a break!
Secondly the the unabashed bias and conflicted legislative agenda (Bill Shorten worked with his union mates at an industry fund for 8 years) is completely galling.
Bring on a level playing field, I’m good for that, I just hate being handicapped yet we do what you espouse should be done.
It is remarkable how little effort has been placed by Advisors on explaining clearly how
1. they are going to unwind existing conflicted arrangements
2. provide advice in future
3. demonstrate that they are putting clients first.
If this is not done, very very rapidly indeed, expect to lose a lot of clients..equally rapidly.
I note that your straw pol does not include that rarest of attributes, valued most highly, namely Integrity.
As an SMSF Trustee al the factors listed in my note here are critical, and are my legal duty to ascertain and act upon in my SMSF role. Interesting how little on these factors have come up in IFA discussions I have read to date..
Gareth Hall – they may not be in power for much longer.
Good point and I wish you well – we need folks like you to keep the Bas@@ds honest!
This article is a disgrace. How do you sleep at night Matthew Linden? I guess well as I guess your wallet & bank account’s are filled to the brim.
Come on 14 September is all I can say. God help us as maybe it’s too little too late anyway…. this whole show is such a political rort, it’s unbelievable.
[quote name=”Steve-jj”]OK – thanks. But would one be putting the employers members into a fund with kick backs anyway?
Best practice would be to have no ‘commissions’, and change an appropriate fee for the advice and ongoing reviews.[/quote]
This is what we tried to say to Treasury all along, but they said the industry’s solution for remuneration was the “intra-fund advice fee”.
We lobbied for transparent plan fees, made submissions to the PJC’s, SEC, etc, etc. The Coalition also supported transparent fees.
The Government obviously wanted the “hidden commission” solution and specifically prohibited transparent plan based fees in the final legislation.
This is why it is now so annoying to be facing a conflicted rem issue that nobody wants to address.
The only conclusion I can draw is that the Govt does not want advisers providing advice in this space and prefers it to be provided by vertically integrated institutions.
Old Ricky – ‘As Rick says, the real cancer in financial services is that the product manufacturers control advice…’
Have to ask – why use them? There are enough investments choices out there to not use manufactured products. If you don’t like then then don’t use them – or is that a simplification of the problem?
OK – thanks. But would one be putting the employers members into a fund with kick backs anyway?
Best practice would be to have no ‘commissions’, and change an appropriate fee for the advice and ongoing reviews.
[quote name=”Steve-jj”]’
.[/quote]
Steve-jj, the conflict potentially occurs where a Financial Planner makes a recommendation to an employer to put a particular Corporate Super fund in place, with the knowledge that they will receive ongoing income from the fund (being a flat ‘dollar per member’ intra-fund advice fee paid by the fund administrator/trustee for services provided. No transparent plan-level fees are allowed by legislation).
Neither the tender or the ongoing income are conflicted, but when combined they are. (I.e. why not use a fund that doesn’t pay).
In many cases smaller employers just want some help to identify the best fund for their staff and don’t want/can’t afford to employ a consultant for a full blown tender.
Employees of banks or funds can make a recommendation of their employers fund and be paid a wage/bonus and this is not conflicted. Competition is being proactively removed from the market.
Agree with most of these comments. Why is ISN being allowed to comment on finacial planning. They represent product manufacturers. They will become institutions flogging their own product through ‘advisers’ with business targets. The next CBA type disaster has been legislated.
Tony Abbott does not appeal to me , but the thought of no longer having the ISN at the table setting policy for the practices of financial advisers might just swing me
As Rick says, the real cancer in financial services is that the product manufacturers control advice, and the costs of FOFA, designed to show cost of advice to consumers so the ISN funds can compete, will in fact drive out small licences.
All of that rubbish at CBA, which dammned everyone of us, was because of the same high pressures sales tactics we used to have in tied offices when the product providers paid for your office.
Until the banks are forced to give up control of distribution ( sorry, wealth management )nothing will change. ASIC apparently are not interested in entering the debate on seperating manufacturers from advice, becauuse they have always had the view that fewer, but larger, licencees are easy to control.
Another example of ill informed & ignorant comments about FOFA and un necessary criticsm of the Financial Planning Profession
‘ (The CSSA)have been involved in dialogue with ASIC, Treasury and Minister Shorten’s office to try to resolve a potential conflicted remuneration issue that we identified’
Why don’t you let us all know what the conflict is? Publish and be dammed.
Scaled advice = telephone call centre advice from ISN [i]highly qualified[/i]telephone sales support people. Their best interests duty include considering non ISN solutions does it?
If the ISN was serious about reducing fees how do they justify $300M to $400 in advertising – only to benefit members?? Or only to benefit union delegates and mates?
I have an idea, how about a regulation requiring ISN’s to provide full investment costs (including underlying managers) and insurance brokerage commissions THEY receive from mandated super contributions and compulsory insurance?
The double standards and hypocrisy of these jokers takes my breath away.
Scaled advice used to be known as limited advice, its been around for a long time Linden. FOFA stands for F#@* Off Financial Advisers and was created to ensure union controlled ISN’s & product providers can get more of the pie from IFA’s.
Linden talks of reduced costs and yet no one ever has to justify spending 30MILLION dollars a year on advertising ISN’s ad nauseum. Who exactly does that benefit Linden??
Once again the client will be worse off & the ISN’s & banks, well, they will continue to pillage!
scaled advice hmm , nothing like providing the big picture to a client Scaled advice is really only the Industry based funds,
So when a client sees you and your indentify other issues i suppose you just ignore them, Sacled advise sound fine in theory, Legal professional must be rubbing their hands as the claims for poor advice is only around the corner
Sectors of the financial planning industry have been working tirelesly to be prepared for FoFA. A group of Corporate Superannuation Specialist advisers (The CSSA)have been involved in dialogue with ASIC, Treasury and Minister Shorten’s office to try to resolve a potential conflicted remuneration issue that we identified. So far ASIC have told us that they can not help and that it requires regulation, but we have had no answer from Treasury or Minister Shorten.
As Matthew Linden says, FoFA starts on Monday. How can we run our businesses going forward if we can not get answers from the regulators?
As far as cost savings go, someone has to pay the implimentation and ongoing increases in costs brought about by FoFA. These have been disclosed by the FSC. Of course the consumer will foot the bill so costs will increase (and already have for some – including ISN members).
Pretty much all ISN models are based on 0.5% ‘admin’. It’s a joke, a rort and the double standards that exist have been manipulated by a phoney union driven agenda. Time to remove all advice channels from manufacturers.
Are we really surprised by these comments! Mr Linden is paid to make the statements he makes to protect the industry he is in. However he should not proclaim to know anything about personal advice given that is not the game he is in! I look forward to the day when the tide turns and the financial advice industry is given the respect that it truly deserves.
Are we really suprised at the comments; FOFA and MySuper is all about Labour looking after their mates.
Would that be the scaled advice, of Silver, Gold or Platinum with corresponding fees of $4k, $8k, $12K PA, of are you offering true scaled advice to meets the specific request of a client.
A genuine Q, as so many planners just want to pigeon hole into a preset package deal, and that is not scaled advice IMO.
This article is a disgrace – How in God’s name will FoFA reduce costs. You cannot single out scaled advise and then make the conclusion that FoFA overall will reduce costs.
There will be many poor unfortunates that never obtain financial advice going forward because of the increased costs associated with FoFA. This, in my view, is tragic.
The ISN should mind there own business. How on earth do they even begin to know what we have or have not done to get ready. And sorry, wasn’t some legislation just passed on Monday – 7 days before its (in)effective? Stronger Super and Intrafund advice locks in Vertical intergration for Industry funds and their advice channels which is a systemic plan to make sure consumers Best Interests cannot be met. A failure of Best Interest is an intended consequence of the legislation which guarantees advice that favour of the product manufacturer (inc industry funds) over the consumer
Haha this made my day 🙂
How wrong can a person be…..costs are going up already. We were already doing scaled advice….that is not really anything new. Still amazes me how the ISN gets a guernsey in formulating policy for financial advisers. Who paid for that research report by the way? What a con job.