Association of Financial Advisers says fee-for-service won't guarantee better advice
The Association of Financial Adviser’s chief executive, Richard Klipin, has warned that shifting to a fee-for-service model will not guarantee consumers receive higher quality financial advice or that financial advisers will create better business models.
Klipin said the industry still had to define the difference between fee-for-service and commission models in the interest of transparency. Fee-for-service was determined by a range of factors and the consumer had a right to know what was included in the fee and sign off on it, Klipin said.
“[Fee-for-service] considers things like margins for overheads, profits and so on. Understanding these metrics is the cornerstone of all profitable and productive businesses,” Klipin said.
“If we accept that a ‘fee’ can be directed by a client but we allow that fee to be paid by a product provider, isn’t it still a commission, no matter what you call it? And as a result, isn’t this kind of ‘fee’ still open to the same conflicts of interest as commissions?" Klipin added.
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