Government reforms to the way financial planners give advice could cost consumers almost $100 in extra fees, according to figures from the industry body.
Under government plans to overhaul the financial advice industry, wealth managers will be required to send clients a renewal notice every two years to stop consumers unwittingly paying for advice they do not receive.
Advisers would also be expected to submit a full fees disclosure report to all prospective and existing customers, a requirement which the Financial Services Council (FSC) argues could cost companies up to $60 million in extra costs.
This could break down to $97.86 per person – a cost that would inevitably be passed on to consumers – according to FSC senior policy manager Cecilia Storniolo, who authored the body’s submission on the bill.
“Retail clients already receive the disclosure this measure is attempting to address,” the submission to the parliamentary committee reviewing the bill said.
The figures come amid growing concern that the government has dramatically underestimated the cost and complexity of the reforms put forward under the Future of Financial Advice bill.
Bank managers have already called into question the basis of the $11 cost per person estimate the government has adopted as the basis of its cost estimates.
Last month, Financial Services Minister Bill Shorten said he would consider pushing back the July deadline, capitulating to industry accusations that the changes could not be implemented in only a few months.
“The minister is open to considering whether further transitional arrangements are required beyond what ASIC (Australian Companies and Securities Commission) signalled in the last few days,” a spokesman for Mr Shorten was quoted as saying in media reports.
According to the FSC, much could be solved by simplifying and delaying the reforms.
The body said enforcing only “a pertinent summary of the fees” in the disclosure statement would almost halve the cost per head to $53.97 and reduce duplication of other reforms being brought in after the global financial crisis.
And it argued that the bill should be introduced in stages between July 2012 and July 2013 in order to give the industry time to adopt the changes for new and existing clients.
“Proceeding with a 1 July 2012 commencement date will result in the vast majority of the financial services industry being unable to provide financial services to existing and new clients,” the FSC said in its submission.
The Parliamentary Joint Committee will report its findings in March.
