THE Association of Financial Advisers (AFA) has expressed concerns about recent industry calls for the introduction of a rigid fee-for-service advice structure.
According to AFA president Michael Murphy, such a regime “could do more harm than good for consumers, limiting their choices and access to financial advice”.
In addition, Murphy highlighted the increasing need for advice as the super balances of Australians increase.
He said: “Now that you have mandatory super, we’ve got this plethora of people running around that all have an asset in their super, which is probably their second largest asset alongside their principal residence.
“Now those people really are screaming for advice, they don’t get it in the low cost funds, and to think that they will have to pay for it as a fee tends to frighten them off a bit.”
According to Murphy, many accounting firms that have moved into financial planning are pushing the fee-for-service model.
He said: “Their model has always been fee-for-service, and I think a lot of publicity surrounds those people. They have got their own press machine and they are saying you have to find someone who is fee-for-service, but that is just the model they have always used.”
However, Murphy said that while the debate rages over advice remuneration models, planners who offer pure fee-for-service arrangements are still in the minority.
He said: “It’s interesting because if you talk to the fund managers and insurers, they are saying there’s a very low percentage of business which we transact where all of the fees, charges and commissions are fully rebated.”
AFA chief executive officer Richard Klipin said that AFA members are increasingly concerned about the changing advice landscape.
“They are saying we have gone through a lot of change already, we are just coming to grips with FSR and SOAs and disclosure. There is a sense that the ground is shifting again.”
Meanwhile, a national newspaper has reported that ASIC is considering a plan to force planners to disclose to clients any abnormally high commission they received, following the collapse of Westpoint. However, the regulator stated that it has no intention of banning commissions entirely.
