Remuneration structures not limited to two

The widespread belief that charging a fee-for-service or accepting commissions are the only methods of remuneration available to advisers is flawed, according to the head of a financial services organisation associated with industry superannuation funds.

Future Plus Financial Services chief executive James Thomas believes his group is operating under a viable alternative to these common structures.

“My group does not believe in paying commissions to our planners nor do we believe a fee-for-service model suits our clients. There is a happy medium,” he said, speaking at a Financial Planning Association Sydney Chapter presentation.

“Our advice is provided on a cost recovery basis … this simply means we charge a pool of financial planning clients an additional management expense to cover the cost of running a financial planning division, and we pay our planners a salary only,” Thomas added.

Regardless of the remuneration structure in place, he feels transparency is one of the most important elements in order to make superannuation an investment vehicle that is robust as possible for members of the public.

Thomas also cited advice as being the most critical item involved with superannuation for consumers across the nation, particularly in light of the new simpler super rules that have just come into effect.

“We all know that between 85 to 90 per cent of a member’s investment outcome is going to be determined by the asset allocation,” he said.

“So the decision to have money in shares before cash is a far greater decision to make and far more important decision to make than which manager you are going to choose. So advice is important at that fundamental level and that’s where planners can add real value rather than having members simply adopt the default investment, which may or may not suit their individual needs,” Thomas concluded.