FOFA reforms could improve succession plans
Planning for the Future of Financial Advice (FOFA) reforms could have the added benefit of refining adviser succession plans, according to a financial planning consulting firm.
The business preparations required for financial planners to be FOFA compliant are similar to the preparations needed for business succession, and will help create strong business models for advisers.
"It could mean succession is actually easier in the future, because for a business to comply with FOFA they need to implement some things that we would consider to be pretty good business fundamentals," Elixir Consulting managing director Sue Viskovic said.
"They haven't had to do them in the past. So when you charge fees for your services, you need to be able to articulate what those services are and you need to have systems in place to ensure you deliver on those services."
FOFA regulations to replace the existing commission system will mean financial planning firms need a clear business model going forward.
Ms Viskovic said that articulating business goals will put succession planning higher on the agenda within the financial planning industry.
"If advisers had a commissions system they could service a client and they would start receiving a trial commission, and not necessarily have to ensure that they deliver a valuable service moving forward," she said.
"Now, those businesses have a lot more difficulty in succession because they don't have a well-structured business model, whereas the businesses of tomorrow will have to be a lot clearer and have better business fundamentals in place."
However, some advisers who had experienced the changes through past market volatility, including the global financial crisis, might see the FOFA reforms as a reason to leave the industry.
"I think there are certainly a number of advisers who have decided they've got change fatigue, they can't go through more change now," Ms Viskovic said.
"I know many who have said they just don't have the energy to go through another wave of change."
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