Correspondence: FoFA reforms, crypto-currencies, and NAB's latest hybrid

On Alan’s FoFA reform crusade

In Alan’s weekend briefing two weeks ago he asked financial advisers to tell him why he’s wrong in regards to the Coalition review of FoFA legislation.

I have operated fee for service since 2006.  I find the whole FoFA legislation onerous, poorly thought out and in no way the solution to the problems in this industry.  Most of the problems do not sit with the advisers but with product providers, and my clients' are not concerned whether I am paid a fee or a commission, as long as it is clear what the cost is, and as long as I deliver on what I say I will do.  The current requirements are simply making it too expensive for me to look after clients who cannot afford to pay a fee, and scaled advice is not possible if you read the meaning of the best interest provisions.  There is only one advice I can provide and that is full advice.

I have warned all our clients about the pros and cons of residential property and super.  Has the FoFA legislation prevented property spruikers from pushing this strategy?

What the govern,ent should focus on is education requirements for planners (both in terms of study and practical experience a bit like the Chartered Accountant model), efficiency in terms of being able to produce concise advice documents with plans less than 8 pages and effectiveness, allowing us to serve people better and quicker so we can provide advice at lower costs.  The proposed changes just make it difficult to service clients’ needs, and are making it more difficult for honest planners to meet their clients’ needs as a reasonable price.  Make it easy for clients to move, and let market forces work.

Name withheld

I read with some disappointment Mr Kohler's lament last Saturday ("Here we go again") that the Coalition was setting out to unwind the Labor government's FoFA legislation at the behest of the large, and rich, retail funds and the financial advice industry, an industry from whose clutches my wife and I escaped some nine years ago.

This was, however, nothing to my disappointment that he, and those who went to the polls in September to elect this government, should have expected anything else from them!

Michael Dunn

I heartily endorse Alan’s comments. I am an accountant and financial planner (FP) about the same age as Alan. I switched all clients to a set fee for service in 1991. I am appalled at the behaviour of the FP industry over the past 20 years or so. I enjoy the work I do as a planner but I tell everyone I am an accountant as I’m not proud of the industry.

The thought of this liberal government turning over things like volume rebates for example is just mind numbing. I really doubt they understand how this industry really works. Maybe they do but they choose to let the mums and dads of Australia get ripped off as they have been for years. Volume rebates means that we cannot be described as professionals. It's that simple. And that's just one of the things the new government is looking at reversing – amazing! Keep up the crusade Alan.

Greg Eden

Investing in crypto-currencies

Recently I have been reading comments in the blog space on crypto-currencies and that there is an opportunity to invest in them.  Bitcoin is the most high profile but Quark is one begun in July 2013 and one of its founders, Kolin Evans, is based in Sydney. Do you have any thoughts on investing in crypto-currencies?

PT

Editor’s response: Thanks for your letter. Even more than was the case when Eureka Report wrote about Bitcoin back in May, investors are getting in on the action, sending Bitcoin above the $1,000 mark late last month.

However, one of the main weaknesses with Bitcoin and other online currencies, such as Quark, are their perceived lack of legitimacy – though Bitcoin did make headway when a US Senate committee described it as legitimate early in November.

Digital currencies are also high-risk as they are volatile. Hacking scandals and the closure of Silk Road, an illegal online drug marketplace, has seen Bitcoin’s share price plunge in the past.

NAB’s hybrid securities offer

Just wondering what your thoughts were regarding the issue of NAB CPS II which closes 9 December. Would I be better off buying more NAB shares or investing in the NAB hybrid securities offering?

Joanne Hilliard

Editor’s response: Thanks for your letter. As hybrid securities and equity are different asset classes, it is difficult to compare the two. However, you can read Philip Bayley’s take on NAB’s CPSII offering last month here as well as John Abernethy’s latest recommendations on each of the four big bank stocks.