Speaking exclusively on the most recent episode of The ifa Show, Mr Ripoll – who was instrumental in the development of the FOFA legislation when he was in parliament – dismissed the question as to whether the removal of product commissions led to advisers needing to raise their fees thereby making advice less accessible.
“I’ll give you a blunt no. Not really. FOFA was important for a whole range of reasons, really trying to separate advice from product and we’re not quite there with that,” he told ifa.
“There’s best interests duties. It’s made for a better market, a more professional market. I’d like to think that there’s almost no one left today that think it’s a bad idea.”
A recent ifa poll, which surveyed 520 respondents, found that 51.7 per cent of advisers have had to increase their fees due to new regulation.
Mr Ripoll said he has sympathy for the fact that regulation and government interference with advice businesses stifles growth and innovation. However, because the industry has proven that it cannot check itself effectively, the government is often left with no choice but to step in and regulate at the last minute.
“There’s a lot of low hanging fruit which I’ve always believed the industry could pre-empt the parliament. Fix the issues internally, fix the issues that are really clear and obvious and there’s less work for the parliament to do,” he said.
“The more that people actually get together and agree on a path the more you can resolve some of these issues without the need for heavy handed regulatory reforms which are always, in the end, a little bit clumsy.”
Practice management consultant Jim Stackpool of Certainty Advice Group agrees with Mr Ripoll, telling ifa the reason some advice firms are increasing prices is actually due to a growing consumer demand.
“Have advisers had to increase fees due to regulation? No. We are finding that our advisers generally, not all of them, who are building professional advisory firms along the lines of FOFA are increasing fees to satisfy demand,” he said.
“They can’t keep doing all they’ve done for every client they’ve ever had. Our model is a more-for-less model, so doing more and more for less clients.”
“For me, it’s the fact that there are going to be new costs as the advice market opens up and as it works towards becoming a profession. It’s a ticket to the game.”
To listen to the full interview with Bernie Ripoll see the latest episode of The ifa Show:
Based on the Tony Abbott measurement stick…has Bernie Ripoll ever filled in a BAS form?
Bernie I guess only mingles with CEO’s. In my neck of the woods we’ve actually lost about three advice firms and these largely I could put down to FoFa. Essentially merged and sold off during 2012 to 2015 years. That’s a lot of back office jobs gonski. Personally I now turn a lot of clients away because of advisory fees and also largely dealer group FOFA induced imposed red tape (they require four forms to be signed for a client to pay a fee… go figure) and Opt in legislation mainly. I think the only ones FoFa benefited is Union back super funds.
Yet another example demonstrating just how little Labor understand business and finance!
Interesting article but one that I believe is wrong. I have no issue with the best interest requirements or anythind to do with FOFA really, but the increased time it forces advisers to spend has to increase the cost to the clients if we are working on a fee for service modle based on hours spent on the file. Basic maths proves that so I am a little surprised it is being argued.
Is the client getting a better service post FOFA? I would say they probably are because the adviser is being upfront with fees, engaging the client at least every two years and having to do a decent amount of research before making a recommendation. All of those benefits lead to a higher cost to the client however and one that will continue to rise.
That’s actually great news for the advice profession. Rising fees demonstrates confidence, a strong belief in the services you offer and your real value-add (supply/demand is the natural order of things). Of course, the cynics who believed that advisers couldn’t possibly re-engineer their practices, let alone prosper, in a post-FOFA environment must be a little confused and disillusioned by now – they’re the same ones now predicting devastating technological disruption. As for the lack of affordability issue, be careful what you wish for, Australians can thank Ripoll, Choice, and the union-backed/flat earthers at ISA for ultimately hurting the little guy, not financial advisers.
At least one platform operator increased their costs and applied additional charges to reflect the costs of regulatory change. To suggest that regulatory change doesn’t involve additional costs (in at least the short term) shows either wilful blindness or naiveté (both of which contributed to the regulatory morass in which we are mired).
I think, sean, it is all about “conditioning” which will allow a political agenda to follow. Labor don’t like advisers charging a fee beyond what they themselves value (how many have advisers?) yet they support ISN doing exactly that. mmmm, almost a communist agenda – everyone is equal except those at the top. He is far from Naïve. Politics of ideology over reality.
This is a bit like listening to the priest about marriage advice !
Of course it has and of course the LIF will do the same thing but lets not let the facts get in the way of sticking your head in the sand when it comes to blame.
The general principles of FOFA are fine. It is the bureaucratic way it is being implemented and enforced that is driving up costs. Bernie must be losing his marbles if he can’t see that.
As for Jim Stackpool, I used to have respect for the guy. But to try and turn a legitimate problem like this into a tacky sales pitch for his consulting services is a new low.
Bernie Ripoll is just another Labour Party hard nose prosecuting and agenda that was established by Keating in the late 80’s. FSR had some good elements of reform but was the start of adding cost to the provision of advice and put it out of the reach of many of those who really need it. FSR predictably saw direct insurance flourish as well as platform provided insurance to the deteriment of those most need advice. FOFA has worsened the situation and on balance is a far less progressive reform adding more cost and complexity with far less consumer benefit, LIF changes are the final straw adding even further cost, pushing more away from advice and all based on no substantiated evidence.
Yes I suppose we are still toying with the flat earth theory – of course FOFA increases costs, admit it and lets just move on. The important question is, has it improved for the client, a resounding NO – FOFA has been a catastrophic failure IMO, yet another complete let down by the people who are have self anointed.
Its further complicated, confused and frustrated the average client.
Has Bernie ever run a financial planning practice? No!!
So how does he know what costs of increased regulation has truly hit Planners businesses? He wouldn’t know.
Airforce electrician, state public service, union organiser and then politician. No experience running a business let alone a financial planning business
Not even any experience working in a business.
How do we allow these people to become politicians in charge of portfolios they have absolutely no qualifications in or clue about, let alone somehow become seen to be a so called ‘expert consultant’ in the area? If this was our industry that would lead to a criminal charge!!