War of words
1. Commissions versus fee-for-service
It only seemed to matter to planners themselves, but the debate over whether advisers should be remunerated by way of commissions or by way of fee-for-service dominated discussion in the early months of 2006.
The catalyst for the debate was a move by ANZ to establish a fee-for-service model for its planners and the manner in which this gained currency in the marketplace.
However, as the debate matured throughout the year it was broadly agreed by both the financial planning industry and the regulators that the key to financial planner remuneration was transparency, and that clients simply needed to be fully informed of their options.
Most dealer groups contacted by MoneyManagement throughout 2006 suggested they would be maintaining a dual fee-for-service and commissions model, with clients being the ultimate determinant.
2. Industry funds versus planners
The industry superannuation funds may not have set out to directly attack the value of advice provided by financial planners, but irrespective of their underlying intention that is how their ‘Compare the Pair’ advertising campaign has been interpreted by many in the financial planning industry.
To some degree, the perceived success of the industry fund’s ‘Compare the Pair’ campaign gave rise to increased levels of dissatisfaction among some financial planners, with the Financial Planning Association’s own ‘Dazza’ campaign.
Amid calls by some for a more direct counter to the industry fund’s ‘Compare the Pair’ advertisments, the FPA in October launched its own ‘compare the pair’ exercise concentrating on the level and diversity of advice provided by planners when compared with that provided by industry super funds.
3. Westpoint
There was no debate about the consequences of the Westpoint collapse, but there were plenty of recriminations about the role of the regulators, the auditors and financial planners.
While some financial planning firms were in early 2006 seeking to determine whether they could pursue Westpoint’s auditors to recover clients’ funds lost in the collapse, others were seeking to explain why the development company had made it onto their recommended lists.
Underlying the claims and counter-claims surrounding Westpoint was the debate within the Financial Planning Association about how it might seek to discipline any members found to have acted inappropriately with respect to Westpoint.
The collapse remains an ongoing issue for the industry and one likely to generate further debate through 2007.
4. ASIC’s shadow shopping exercise
AMP Financial Planning’s agreement to enter into an enforceable undertaking with the Australian Securities Investments Commission (ASIC) after a number of its financial planners were identified in the shadow shopping exercise lifted the superannuation switching debate to a whole new level.
The debate was not only about the quality of advice being provided by AMP Financial Planning, but also about the way ASIC handled the publicity surrounding the announcement of the enforceable undertaking.
Whether AMP Financial Planning liked it or not, the issue continued to feature in the speeches delivered by key ASIC officials at a range of industry conferences throughout the remainder of 2006.
An unintended consequence of the ASIC shadow shopping exercise was a decision by some financial planners not to provide advice to clients related to superannuation switching, particularly where super balances were less than $100,000.
5. Shelf fees on platforms
While some commentators described them as ‘nefarious’ and the ASIC signalled that it was monitoring the situation, others in the financial planning community could see no great problem with dealer groups charging a fee to list some funds on their platforms.
As with the fee-for-service versus commissions debate, the underlying defence of shelf fees is that they are defensible in circumstances where there is transparency.
The question confronting those imposing shelf fees is whether the regulator will ultimately either intervene or impose a ruling on their use.
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