Home / FoFA changes to cost Australian Unity over $1 million

(Pictured: Steve Davis)

For the relatively small financial advising arm of the Australian Unity group, the changes in Future of Financial Advice (FOFA) legislation have already cost it $1 million – and could cost the group perhaps another $250,000 as a result of this week’s reversal by the Senate.

Steve Davis, chief executive officer of AU’s personal financial services, gave these estimates at a briefing by the $1.3 billion revenue healthcare, financial services and retirement living group on Thursday. 

The group now has 130 financial advisors and more than 20 finance brokers and is adding general insurance brokers to its team. Its numbers have been expanding rapidly in the last three years and funds under advice and its loan book have grown at almost 50% compound a year since 2009-10 to reach $4.3 billion by 2013-14. 

Davis said AU had deliberately established a fee for service advisory business, when it began a decade ago, to distinguish itself from the more usual commission-driven model of most financial advisers. 

He said with a total of about 150 advisers, the group was among the 20 largest firms in the industry not owned by a major bank or life office – an important distinction, given that  the major institutions have now absorbed well over half of the industry.

His reaction to the reversal of the Coalition reforms to FOFA probably mirrored others in the industry – frustration at the latest changes and the need for a further phasing in period for the changes to commence. 

Davis was critical of the extra red tape involved in original
FOFA requirements, to notify clients annually of the fees charged, and to have the advice agreement renewed every two years.  He said, like other advisers, AU had found a low response rate to such mail outs – and in some cases, clients had sent back cheques after receiving the notice of fees paid, mistaking the advice for an invoice.

When the Coalition’s changes were announced last
December (to apply from July 2015), the Australian Securities and Investment Commission announced a period of “no enforcement” to allow for transition. The Finance Minister Senator Mathias Cormann is still threatening to attempt to reverse the latest changes, despite the unhelpful current voting numbers in the Senate.

– Barrie Dunstan