Fee for service still an initial hurdle
A fee-for-service model can represent a hurdle to attracting new clients, according to a Sydney financial planner.
Nigel Stewart, chairman of financial planning firm Stewart Partners, said the “best practice” approach of charging fee for service can penalise firms that employ this model.
Stewart said this model “often penalises our firm when attracting new clients as they may believe our approach is more expensive than their current arrangements”.
“However, if we are able to do a full cost analysis [for prospective clients] – a task even we often find difficult to complete given the lack of transparency in financial services – we typically find our approach significantly reduces their investment costs.”
Stewart said his firm has charged a fee for service since 1998 to ensure transparency of investment costs for clients. In a submission to the current joint committee inquiry into financial services, Stewart said he believes the remuneration models “used by many advisers can drive behaviour that is inappropriate” and not in clients’ best interests.
He believes the current commission remuneration model has inherent conflicts of interest “that cannot be avoided or diminished to an extent” that the model “will ever be acceptable”.
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