ASIC wants licensees to decide over fees or commissions

The chairman of the Australian Securities and Investments Commission (ASIC), Jeffrey Lucy, has reiterated that it will not be imposing its views with respect to the fee-for-service versus commissions debate, but warned commissions-based arrangements need close monitoring.

Lucy told the Investments and Financial Services Association conference on the Gold Coast that how financial advisers were paid “is a matter for individual licensees, not ASIC”.

However, he said there was a clear need for management to adequately manage the advice given to clients where the adviser was remunerated through a commission structure or where the adviser recommended associated products.

“Our experience suggests that there is a materially higher risk of poor advice being given in these circumstances,” Lucy said.

He suggested that the answer for the industry was clear and that it needed to either closely manage commissions or change the remuneration model.

“As I stated to the Parliamentary Joint Committee on Corporations and Financial Services in June, this year, we recognise that ‘like oils aren’t oils, commissions aren’t commissions’,” Lucy said.

He said that if the commission-based remuneration model was to be retained to provide an alternative in a competitive industry, it must not impact on or influence the quality of advice, including the products recommended.