The Institute of Chartered Accountants of Australia has called for the implementation of advice-based fee models throughout the financial planning sector.
It warns in a new research paper that the financial planning sector will not come to be seen as a true profession until the current dominant commission-based models are scrapped.
It suggests that a model based on the sale of products to generate remuneration will never be in the public interest due to irreconcilable conflicts of interest.
The ‘Reinventing Financial Planning’ paper carries the proposal, among others, as a “best practice model for the provision of financial advice”, according to chief executive officer Graham Meyer.
“By adopting these reforms the planning industry can shape the future direction of the sector, effectively minimising the need for legislative intervention of the industry.”
Meyer said the offending dominant model should be replaced by “fully-disclosed advice-based fee models, calculated by reference to time and/or a published scale of fees that is not based on existence of assets.
He also disputes the claim that the offending commission-based model must be maintained so that ordinary Australians are not precluded from obtaining planning advice.
“The real issue is not the affordability of the advice but the low value placed on that advice due to the industry’s fundamental structural problem.”
