Proposed amendments to the current Future of Financial Advice (FOFA) reforms are without doubt the most talked about issue in the financial services sector.
Everyone has a view about what the proposed changes may or may not mean: government, opposition, licensees, financial advisers, associations, consumer advocates and the general community are all getting involved.
Those in support of the reforms argue removing opt-in and amending fee disclosure statements to be provided to post 1 July 2013 clients only will save licensees millions in implementation and ongoing costs. Those opposed argue the reforms will negatively impact on consumers by removing important protection mechanisms and reducing transparency. On permitting commissions for general advice, some say it better facilitates the provision of advice, while others argue it will be a backwards step.
With the intense political focus and heated debate taking place around these issues, it is hardly surprising the topic has spilt beyond industry headlines, to take its place as a topic du jour in the mainstream media. On one level that’s not a bad thing. Consumer education is key to improving financial literacy and there are few better places to achieve that than in the national news pages and on the air waves and television screens.
But there’s another more profound issue at stake, which we, as a sector, risk overlooking.
How many of us have stopped to consider what impact this ongoing and often emotive debate is having on the consumer perception of the financial advice sector?
A colleague recently told me about a friend of theirs, an electrician, who had posted on Facebook a link to an article on the proposed FOFA reforms. Their comment was along the lines that the reforms will benefit the industry, not consumers.
The takeout is not the comments themselves, but what they confirm – that the general public is fully engaged in the debate, and what they see is an industry that continues to be at loggerheads on fundamental issues around remuneration, transparency and engagement, arguing about who should get a commission for what service and under what circumstances.
We ignore this at our peril. It’s not hard to make a case that the financial advice sector already suffers from an image problem, for reasons including mistrust or a belief you would only seek advice if you have significant funds to invest. The fact the percentage of consumers seeking financial advice has not substantially increased in over 10 years supports this view and there’s even research that suggests it has declined.
Given factors such as an ageing population, gaps in financial literacy and an increasing pool of superannuation, this is a real and significant concern and something we, as advocates for our sector, should be working to address.
We all know the benefits of seeking financial advice. We know the positive impact it can have on an individual’s financial wellbeing. However, it is evident we cannot rely on these facts alone to convince consumers of the benefits of seeking licensed financial advice, and well before they reach retirement age.
Consumers are skeptical and, really, who can blame them? With the many high-profile examples of poor advice, it’s no wonder many people already lack confidence that they will receive quality advice that is in their interests and that they can trust.
Given this reality, what further impact will the ongoing FOFA debate have on consumer confidence in our sector, especially when the argument is over the very reforms that were intended to improve the trust and confidence of Australian retail investors in the financial advice sector?
That, of course, is the irony in all of this. But irony and FOFA positions aside, it is clear we all need to work harder in the future to rebuild the confidence and trust of consumers in the industry we represent.
