ANZ Financial Planning is to turn off trail commissions as part of implementing a “true” fee-for-service model, according to chief executive Mike Goodall.
“We will be moving to a true fee-based model by turning trails off as soon as the logistics allow us to do so, which should be in the not too distant future.”
Scrapping trails was partly motivated by a “current debate within industry on whether fee-for-service financial planning really is fee-based with trails in place”, he said.
The move was also motivated by the “positive acceptance” of the fee-for-service model by its customer base since ANZFP officially embraced the model in November 2005, becoming the first institutional dealer group to do so.
“The rate of growth of take-up for fee-for-advice is much higher compared to clients who prefer to remain on commission, which is slowly skewing our business towards a fee-based model,” he said.
“I suspect that in the next few years the fee-for-service model will grow to be a third of our new business in revenue”.
However, Goodall said there is a limit for the growth of fee-for-service as “an awful lot of smaller clients in our database ($11.8 billion in FUM) are yet to understand the advantages of a fee-based model versus commission”.
“From a convenience point of view, they would rather pay for it through the cost of the product.”
The dealer group is “looking at simple, lower-cost advice models, in order to drive take-up of fee-for-service” among this ‘mass’ client category.
On the other hand, Goodall said, the model has “received a very high strike rate” from the mass affluent and affluent categories.
Meanwhile, Goodall said ANZFP will be in a position (from next year) to “disclose the cost of the advice in our statement of advice and ongoing statements versus the cost of the product”.
“We are very comfortable with a Financial Planning Association principle that you need to be able to make this clear separation disclosure from January 1 next year.
