Australians don’t like paying for advice
Financial planners can do no right in the eyes of the Australian public in terms of the fee versus commission debate, discussion at theFinancial Planning Association’s (FPA) Sydney chapter lunch has indicated.
A discussion panel at the event unanimously agreed that while Australians don’t like paying fees, they do not trust commission structures either.
The panel consisted of Guest McLeod managing director Phil Guest,Associated Planners Financial Servicesmanaging director Ray Miles and theAustralian Securities and Investment Commission’s (ASIC) Mark Adams.
Miles said while he doesn’t believe commissions affect the impartiality of planners, this is not the case for Australian consumers. This perception has largely been fuelled by media, Miles argued, although he added a bigger problem facing the industry is soft dollar arrangements.
“I don’t think [commission affects impartiality], I’ve seen no evidence of it in investment type products - most managed funds allow you to dial brokerage levels up or down throughout the year anyway. Soft dollar on the other hand can make a bias - it’s where bad press comes from,” Miles said.
Guest said while commissions can be in the interest of consumers if adequately disclosed, “all soft dollar [commissions] should go”.
Miles predicted in the medium term “we’ll still be living on a combination of fees and brokerage [commission], but our business will only be regarded as professional if we make the change to fees, and that’s got to be our long term direction”.
This move to fees, however, is being largely hampered by the consumer, according to Miles and Guest.
In reference to his group’s recent attempt to break into the Singaporean market, Miles said fees was one of the sticking points.
“Singapore said, unlike Australians, they didn’t want to pay fees. But Australians don’t really want to pay fees either.”
Guest said in a perfect world the industry would work on a fee structure, “but you’ll struggle to get a good fee out of Aussies”.
Guest said advisers have got to start selling fees, as the majority of advisers in the country don’t know how good their advice is, and are not charging enough for it.
Adams said the fee versus commission debate is not the focus of ASIC’s attention. The attention is on disclosure of remuneration and how companies comply with the new regime.
Adams also raised the idea of a menu card concept allowing clients to compare different products against market rates and planner remuneration, a concept which was questioned by an adviser in the crowd.
“We’re paid for advice, we’re professional, how many other professions are asked to detail the alternatives?”
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