Ocean of passive fees engulfed advice

The Australian Securities and Investments Commission (ASIC) has observed that more firms were scrutinising the fees they were charging their clients, following the Future of Financial Advice (FOFA) reforms and fee disclosure statement requirements.

Speaking at the Association of Financial Advisers' 2015 National Adviser Conference in Cairns earlier this week, ASIC deputy chair, Peter Kell said the financial advice industry had charged an "ocean of passive fees" in the past, where clients paid for services that ultimately were not provided and this was one of the unsavoury aspects of the industry.

"ANZ has made an announcement, and I don't think they will be the last one, where ANZ has now progressed the fact that it's not consistent for the profession to be charging people for services, for advice that ultimately doesn't get to them," Kell said.

Related News:

Referring to the results of industry reforms, Kell said ASIC had witnessed a shift due to its financial adviser register, saying that around 22,500 advisers were on the register, and it had seen over 300,000 searches since it was introduced in March.

"Also, what we're seeing is that firms are now coming to ASIC, and I suspect talking to each other, saying: ‘Well, we've had a problem with that adviser. We're either going to have to breach report them or we have real concerns about their behaviour'," he said.

Firms were having discussions amongst themselves and with the regulator to ensure advisers were not repeat offenders, he said.

This was considerably different to the past, where it would be impossible to track down the ‘bad apple' advisers, as firms would have moved them on to other companies.

Kell also said advisers needed to think about how they positioned themselves, and should refer to their "practice" and "profession", rather than their "business".

"You'd never hear a lawyer saying they run a business or a doctor talking about their business," he said.




Recommended for you

Comments

Comments

This guy does not live in the real world. Most doctors and lawyers are acutely aware they are running a business, the business is advice. Please Mr Kell, if you are so enamored with those professions go and join them, you might be surprised what you find. Doctors doing unnecessary surgery for the big fees? Lawyers over billing? As for passive fees - lets call them trailing commissions in the most instances. Most advisors send letters inviting clients to review their situations - a lot of clients don't respond. Additionally, lets turn off all these fees tomorrow - no problem - will ANZ reduce its product fee by the amount of trail paid to the adviser? No, because they will rely on a technicality that the product structure won't allow it or its too difficult technology wise to make such a large scale shift. Why weed out advisers as the only problem here? Its gutless when there are bigger fish at the head of the system you could enforce change upon.

The last time I went to my Doctor he didn't give me a 50 page document setting out his advice, the implications, the alternatives, the costs, kickbacks from pharmaceutical companies. No did he give me a Medical Services Guide (MSG) setting out the type of medical advice he was limited to. His advice was also subsidized by the Govt. The law dosen't even allow my upfront advice to be claimed as a tax deduction. It's the system Mr Kell. I'm starting to think this guy does not have a clue and it makes me think how much dealer groups & adviser associations have let planners down.. In one breath he talks about "systematic" flaws and the next he's kicking into the financial adviser again. Go after the real thieves, the big end of town, the dealer groups that over enforce ASIC regulations. There are plenty of advisers locked into poor performing dealer groups with poor compliance cultures because of ASIC over regulations. There are plenty of dealer groups getting orphan trailing commissions. Most advisers only want to act in the best interest of clients, to do anything else is practice (business) suicide. Start talking to the advisers and stop talking to Bank CEO's and institutionally aligned dealer group heads.

The guy lives in fantasy land. Consider doctors - Darth is absolutely correct - no doctor provides justification for the treatment regime recommended or the drugs prescribed. He doesn't disclose the rewards received from the pharmaceutical companies or those received for referrals to pathology. The doctor is keen to have as many clients as possible on repeat visits so he can charge Medicare and thus derive a trail income. What a great number, the client doesn't pay so he doesn't care and the doctor mascarades as the caring physician. Remember the screaming when the idea of a $5 fee was proposed. Doctors were up in arms as they saw the hit to their income. When was the last time a doctor told a client they wouldn't provide their insurer a medical report until they had been paid their $1500 plus fee?
Kell's spiel is becoming tiresome. I suggest he consider retirement on his fat taxpayer fund pension.

This guy loves putting the boot in doesn't he!

I think people are being a little harse. I suspect Kell is not silly. Rather he is aware of financial realities. Any business that states "Everything is fine - you don't need my advice/help/guidance" is going to be in trouble in these times where budgets are under pressure. Kell is simply making sure his business/budget is OK, and he still has a job next week. Also he does see predominately the negative end of the industry which must affect your views.

Add new comment