Many small financial planning practices will fail after the Future of Financial Advice (FOFA) legislation is introduced, Bridges Financial Services CEO Michael Carter has warned.

Speaking yesterday during a panel discussion at the Association of Financial Advisers annual conference on the Gold Coast, he said the cost of providing financial advice will “put a lot of suburban planning practices out of business, and the consumer will be the biggest loser in the whole process”.

Mr Carter says FOFA is a “blunt instrument” that has been applied to all advisers regardless of the quality of their practices.

“The legislation makes no concessions to those existing good practices that are delivering good outcomes for their clients,” he said.

But CommInsure GM Tim Browne believes FOFA will help deliver better advice to clients.

“Improving the fiduciary duty will raise the standard,” he told the conference. “The problem is, I don’t think we have the fiduciary balance right for delivering good advice.”

Compliance Risk Solutions Principal Christina Kalantzis says proposals such as the “opt-in” provisions of the legislation “are a waste of time and of no value”.

“This will become a cost burden and just create more red tape,” she told the conference. “The industry has been getting there with terms of engagement, and opt-in will be just be more red tape.”

Ms Kalantzis says the “best interest” proposal is also a waste of time and a diversion from the real issues stemming from the failures of Westpoint and Trio – the products they sold.

She says FOFA should be looking at dealing with the issues that caused the failures rather than blaming advisers for everything that has gone wrong.

“Westpoint and Trio were caused by failures of products, not advice,” Ms Kalantzis said. “But FOFA is not about product manufacturing.”

MP Bernie Ripoll, who chaired last year’s Parliamentary Joint Committee on Corporations and Financial Services inquiry into financial products and services, says product manufacturing is an issue the Federal Government could look at it in the future.

“But products are sold through advice, and we have to find remedies on how they are sold,” he told the conference.

Mr Ripoll agrees there are occasions when commission does deliver a favourable outcome for the client, but dismissed using the fee-based model of failed investment services company Storm as a way to defend payment practices.

“Storm wasn’t about the payment model; it was about the advice they provided.”