Commission rebate service can help planners achieve client-directed payment model
Commission rebate services may be perceived as competing with financial advisers, but they can actually help advisers place control over fees back into the hands of clients.
This is according to My Money sales and marketing director Graham Burnard, whose online commission management service enables investors to receive commissions payable on financial products that are generally paid to financial advisers.
"Good quality practices have not felt threatened by My Money's services because the clients who are getting their services are happy to pay for it," Burnard said.
My Money offers two services, one marketed directly to consumers and a wholesale service aimed at financial advisers.
"Our retail service is really aimed at those self-directed investors who are not getting any financial advice from those products," Burnard said. "It's very clearly aimed at those who are currently not with a planner or really want control over those funds."
The My Money wholesale service is aimed at financial adviser practices that are looking to adopt a client-directed payment model, "whereby the client makes the sole determination about payment for the service they are receiving", Burnard said.
Financial planners can set up a fee account with the client, where they agree on what fee is to be paid progressively through the course of the year. The client can then see what funds are coming into the account from trail and various products, and My Money controls the payment to the planner in accordance with the fees agreed to with the client.
Burnard believes that it is not good enough that planners simply offset commission revenue against the fees they charge.
"That's not good enough in terms of giving the client ultimate control, for the simple reason being that what happens if the client says they don't want to pay for services next year - what happens to those trail commissions that are going to the planner? You end up, like many practices have, with a number of clients on the books where those planners are getting remuneration but there's no service being provided."
He added that it is often not cost-effective for them to rebate commissions themselves.
"If the client decides that they don't want to pay for the advice service moving forward, the planner still needs to collect all this revenue from trail commissions from products that cannot be removed, account for it in an open and transparent way, and then pass that onto the client, and still not receive any remuneration for it. So the reality is that many can't do it, certainly can't do it cost-effectively, or cannot provide the level of detailed reporting we do on a monthly basis."
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