Fee model problems do not lie in admin
The administrative side of the move to fee-for-service is now the easy part of the puzzle as more administrative service providers evolve to meet demand.
One such service provider is REMex (Revenue Management Exchange), which has been launched by the founders of retail commission rebate service provider MyMoney Australia.
REMex sales and marketing manager Paris Kritikos said the online service was developed for the financial planning market to enable the client-directed fee model pushed for by the Financial Planning Association. REMex takes on the administration burden of collecting trail commissions from financial product manufacturers and converting them to revenue that clients can use to pay fees for advice.
Kritikos said REMex is different to other brokerage services or internal dealer group systems in that the payments become client-directed.
“Most brokerage systems internally will only ever pay the adviser — REMex will allow for all the tracking to be done at the client level, reporting on a monthly basis all the trails received. The adviser can set a fee within our system as well,” he said.
“It’s very transparent and the client is in control.”
He said the system also addresses the difficulty around dormant or legacy clients who are not being serviced.
“If the client and the adviser agree that they don’t need advice for the next 12 months, then all the commissions that have accumulated in the REMex account can be directly paid to the client’s bank account,” Kritikos said.
Practice management consultant Lap-Tin Tsun of E&W Strategic Partners said while independent services such as this are a good start, they are not ideal in an industry that seeks to free itself of commissions. And, furthermore, the costs for the service are still incurred by the client.
“The conflict is lessened, but in the technical sense commissions are still happening,” he said. “If at some point a client is legally entitled to not pay commissions at all because they are not getting serviced, just because you’re using a service to push the commissions back to them (and then taking a cut out of that for the privilege), when you think about it this is still a bit problematic.”
Ultimately, administration is the easy part of the puzzle, Tsun said.
“The real problem is, how do you actually position fee-for-service in terms of your clients and the services that you offer, and how do you then put that together in a compelling message you can sell?”
He said communicating the value of advice and then putting a price on it is the difficult part for planners.
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