The government’s proposed changes to FOFA will create more opportunities for financial planners to become self-licensed, according to the Financial Planning Association.
Speaking to ifa, FPA general manager, policy and conduct, Dante De Gori, said the removal of the reliance on conflicted remuneration means financial planning businesses will have to rely instead on client loyalty.
“There will be some consumers that want the backing of a big brand and big institution,” Mr De Gori said. “That will always occur.”
“But there are also people who go to a local financial planner that can provide a more personalised service, and that is what some of the self-licensed guys do really well,” he said.
“It’s a niche market. It’s very particular, it’s very direct and they can provide more holistic services to those individuals who want and will pay for that service.”
The new FOFA model presents opportunities for independent financial advisers who wish to develop a sustainable business model off the premise that clients will pay for quality financial advice, Mr De Gori said.
“Irrespective of where you are – in a large institution or you run your own business – the person that has to pay or it is the client,” he said.
“No longer is it coming from back ended products and all that sort of stuff.
“So the reliance on the business surviving comes from the value proposition and the client who is willing to pay for that advice.”
Mr De Gori said the changes would mark a big shift for financial planning, particularly for mortgage brokers entering the space in 2014.
Mortgage brokers still receive remuneration from product providers for via the distribution channel.
“I don’t know how many brokers charge a fee for service, but the majority would be getting remunerated by the product being selected,” Mr De Gori said.
“That’s fine, but coming into the financial advice space this year, the advice and services they provide with their financial planner hat on needs to be paid for by the client directly, and that is probably the biggest challenge,” he said.
Several firms have been impacted by the corporate regulator’s action.
Super funds must now have a retirement income strategy in place.
Vanguard has called for a complete overhaul of the advice industry.
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