Financial Planning Association (FPA) chief executive Mark Rantall has made clear he does not believe asset-based fees should become an issue in the Australian Securities and Investments Commission’s (ASIC) consideration of class order relief from opt-in.
Participating in a Money Management roundtable in the direct aftermath of the passage of the Future of Financial Advice (FOFA) bills, Rantall said the FPA would argue very strongly that an asset-based fee should not have anything to do with class order relief from opt-in.
"The intent of opt-in was to ensure consumers were not paying for advice they weren’t receiving," he said.
"The discussion we’ve had with Government and regulators so far is that there is a requirement that if you’re paying for advice you’re receiving advice, and that is as far as you have to go to obviate opt-in.
"We won’t be countenancing the removal of asset-based fees," Rantall said. "Asset-based fees are a charging mechanism and the product of a negotiation between the client and their professional financial planner."
Association of Financial Advisers chief executive Richard Klipin agreed with Rantall that asset-based fees ought to no longer be a part of the discussion around opt-in, but rather a part of the discussion between clients and their financial advisers.
"There are a range of ways that advisers and principals will run their business models, the main thing is disclosure," he said.
Mercer’s Jo-Anne Bloch told the roundtable that she did not believe the Australian Securities and Investments Commission (ASIC) would make an issue about asset-based fees, and that if the regulator had intended to do so it would have "forced the issue" before now.
Bloch said Mercer’s clients had a choice – they could pay a fixed fee for an on-going service or pay an asset-based fee.
"I have to tell you that nine out of 10 choose an asset-based fee, and the difference is that an asset-based fee is disclosed, it is in their statement every year, it is in their annual review, whereas a commission never was, it was built into the management expense ratio, it was netted out of returns and it wasn’t very transparent," she said.
