ASIC unilaterally urges against asset-based fees
The Australian Securities and Investments Commission (ASIC) has urged consumers against paying financial advisers on the basis of asset-based fees even before the Government has delivered a formal position on the issue.
The regulator’s seemingly unilateral opposition to asset-based fees has been made clear on its new MoneySmart website which urges consumers to choose advisers offering ‘flat dollar’ fee arrangements over those offering fees based on ‘a percentage of assets’.
“In our opinion, the fee-for-service model is generally a better way to pay for advice,” the new website says. “It reduces the chance that the adviser's recommendation will be biased”.
It then goes on to say: “A ‘flat dollar’ fee, rather than a ‘percentage of assets’ fee, will give you more certainty and reduce conflicts of interest. It is better if the adviser does not have an incentive to recommend that you invest larger amounts of money”.
The advice posted on the ASIC website runs ahead of the legislative outcome of the Future of Financial Advice reforms and prompted Association of Financial Advisers (AFA) chief executive, Richard Klipin (pictured) to express concern.
Klipin said that while he supported the educational thrust of the MoneySmart web site and its efforts to address financial literacy he was concerned that ASIC would express a view on adviser remuneration that did not match that of the Government and was ahead of the outcome of the FOFA reforms.
As well, he said he was concerned that the website had referenced a small number of bodies such as the Financial Planning Association and Choice while leaving out other reputable bodies such as the Self Managed Superannuation Professionals Association of Australia (SPAA), CPA Australia and the AFA.
“We appreciate the regulator’s educational intentions but we do worry about these sorts of things,” Klipin said.
AUTHOR
Mike Taylor
Recommended for you
With many advisers preparing to retire or sell up, business advisory firm Business Health believes advisers need to take a proactive approach to informing their clients of succession plans.
The top five licensees are demonstrating a “strong recovery” from losses in the first half of the year, and the gap is narrowing between their respective adviser numbers.
Retirement commentators have flagged that almost a third of Australians over 50 are unprepared for the longevity of retirement and are falling behind APAC peers in their preparations and advice engagement.
As private markets continue to garner investor interest, Netwealth’s series of private market reports have revealed how much advisers and wealth managers are allocating, as well as a growing attraction to evergreen funds.
