Vicki Massey
The perception of fee-for-service based remuneration structures being synonymous with full upfront payment is adding to confusion in the fees versus commissions debate, according to the principal of a leading accounting firm.
“People just automatically think that once they talk about fees versus commission they are talking about the business model and they’re not. They’re just talking about how they’re going to collect fees. I think most businesses do not understand that there is a difference between business model and collection methodology,” HLB Mann Judd principal Vicki Massey said.
She feels that the financial planning profession itself must try to bring some clarity to the debate, so advisers can take into account all of the implications of the issue.
“I think the industry must raise that clarity, that we’re not just talking about fees versus commissions. We’re talking about a good business model versus collection methodology, and I think that awareness could be raised a lot more. I do think a lot of the dealer groups do seem to be working with their more valuable practices in these areas,” Massey said.
She emphasised that even though a planning practice may switch to a fee-for-service remuneration system, collection techniques did not necessarily need to change. This would ease any cash flow concerns for practitioners because, while they had changed their business structure, they would not have to put a completely new collection method in place.
However, Massey said it was imperative that this fact was properly explained to clients.
“That’s why we talk to our clients about having a business model and having that clear offer and having the client understand exactly what they are paying for, and making sure that the client understands the collection methodology, maybe via an adviser fee, that the platform is collecting on their behalf,” she said.
For those advisers looking to implement a brand new collection technique, Massey suggested electronic means would help neutralise the potential cash flow problems.
“If they are going to want to put in place a collection system themselves, what we’re trying to encourage more of is an automated system, which is something like putting in place an automatic direct debit facility,” she explained.
