Consumers will have to pay for the Future of Financial Advice (FOFA) changes, because the industry doesn’t have the margins to absorb those costs.

Financial Services Council (FSC) CEO John Brogden told a Senate committee looking at FOFA that the initial implementation costs could be more than $1 billion.

“We have looked at the cost of implementing FOFA which is predominantly IT systems and training,” he said.

“The conservative figure we have is that the cost of implementation in its first year alone is $700 million, plus an ongoing cost per annum of an extra $350 million.

“We are talking about in the first year alone more than $1 billion added to the cost base and then $350 million each year, every year, to continue to comply.”

Committee member Mathias Cormann, who is also the Opposition financial services spokesman, asked Mr Brogden if the financial services industry was going to absorb these costs.

“The margins are not fat enough to absorb it, despite what others would say,” he said.

“Advice will be more expensive because of all of these compliance costs, delivered by fewer people as a lot of them will leave the industry because they will not be able to cope with the changes or afford the implementation costs.”

Mr Brogden says the FSC has a real concern the industry will shrink due to FOFA and that will again push up costs for individuals seeking financial advice.