It’s a mixed bag when it comes to advisers and their readiness for FoFA. There are a number of advisers who have been ready for this type of reform for years. I know many firms which have been operating as fee-for-service practices, not relying on rebate income or commission income for many years.
There are also those which are making the transition, and those which haven’t yet started making that transition. I think there are actually a large number of firms in this latter category.
Opt-in has been one of the main areas of concern with FoFA. There is a large percentage of firms which have not yet transitioned to fee-for-service. They have came through the last 20 years building up large client bases where they subsidised the costs of up-front advice by charging trail commissions. Those trail commissions they collect effectively pay for the up-front advice, and obviously some of the ongoing advice as well.
So it’s not as easy just to say ‘get opt-in ready’. Even for those firms that already work on a fee-for-service basis it’s not that easy because some of them have large client lists that they need to communicate potential changes to.
Although one could mount the argument that ‘clients should not be paying for something they’re not receiving’, in many cases they’re paying for something they’ve received in the past.
So I think we’ve got to acknowledge that there is an old model and a new model. Fee-for-service is not just a matter of profitability, it’s now a matter of survival.
