Sections of the federal government’s advice reforms will leave investors exposed and potentially worse off if they are not passed, an associate university professor has claimed.
Sydney University law school associate professor Joanna Bird said if elements of the Future of Financial Advice (FOFA) reforms, such as opt-in, were not passed, there would be an increase in the number of Australians “paying for little or no advice on an ongoing basis”.
“I think opt-in is a crucial part of the reforms and it’s clearly under some threat because there has been significant lobbying against it,” Bird told InvestorDaily.
Bird turned her comments to other elements of the FOFA reforms, specifically the planned remuneration ban and best interest duty.
“The ban on commissions will not stop the charging of asset-based fees in exactly the same way that commissions are charged,” she said.
“So asset-based fees can be used to generate this sort of passive income where consumers don’t actually have to effect any payment and so cannot know that they are making a payment. The ban on conflicted remuneration of commissions won’t help at all.”
In regards to the best interest duty, she said she did not believe there was “any real suggestion” that it would prevent the charging of asset-based fees.
“In fact, if it was going to prevent the charging of asset-based fees, then I suspect that the industry would object to it strongly,” she said.
She said another concern for clients was the lack of engagement with their financial affairs.
“The opt-in is quite a clever technique to protect those disengaged people, but also to allow the engaged people who want to have an ongoing relationship with an adviser to continue to do so,” she said.
A recent CoreData report found pre- and post-retirees had a strong desire to retain an element of control when managing their finances, however, the interest had dropped slightly year-on-year.
More than 35 per cent of post-retirees wanted to retain control compared to 24.3 per cent of pre-retirees, while pre-retirees were more likely at 15.9 per cent to be looking for someone to help them than post-retirees at 10 per cent, the report found.
Close to two in five respondents (38.8 per cent) said they felt somewhat financially secure, while less than one in 10 (9.2 per cent) felt very financially secure.
Around half the survey respondents (54.2 per cent) who used advisers said their adviser had a “considerable influence” on their super and retirement decisions, while one-third (33.6 per cent) said their adviser had some influence. The results were on par with 2011, the report said.
