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Actuarial research house Rice Warner has sought to clarify its position on financial planning fees versus commissions-based remuneration, arguing both can survive side by side.
The clarification of its position came after the Industry Super Network sought to use research it had commissioned from Rice Warner to sustain its long-running arguments against commissions-based remuneration models.
It said the report by Rice Warner for the Industry Super Network was an analysis of fee-based advice delivered by the Industry Funds Financial Planning dealer group and that, not surprisingly, it had shown that their model of fee-for-service advice was provided more cost effectively than a member could purchase from a commissioned adviser in the open marketplace.
“Our view is that these fee-for-service models will expand financial planning to a much greater part of the population than could be reached by traditional planners, and this is highly beneficial for the community,” Rice Warner said.
However, it went on to add that those traditional planners dealing with the high-net-worth segment would continue to advise individuals and families with complex financial structures and these clients would continue to use holistic advice and negotiate a suitable fee.
“In our opinion, both groups can survive side by side,” the statement said. “However, it is clear that middle Australians needing financial advice should first call their superannuation fund, as they are likely to receive a valuable service at a very reasonable price.”
The Rice Warner clarification came at the same time as the Parliamentary Joint Committee on Corporations and Financial Services announced the terms of reference for its inquiry into financial products and services in Australia, which will look at the role of financial advisers, the general regulatory environment and the role played by commission arrangements.
Announcement of the terms of reference prompted Industry Super Network executive manager David Whitely to once again call for the immediate abolition of sales commissions and the immediate introduction of a “best interests” test for financial advice.
