Financial advisers should be required to specifically declare whether they are independent or aligned with a major financial institution while the commissions grandfathering within the Future of Financial Advice (FOFA) regime should be terminated, according to consumer group, Choice.
In a submission to the Senate Economics Committee inquiry into Consumer Protection in the Banking, Insurance and Financial Sector, Choice is arguing that consumers have been getting a poor deal from the financial services industry and recommended specific changes to the financial planning settings.
Amid an array of other recommendations covering other sectors of the industry, Choice urged removal of the remaining commissions grandfathered by the FOFA regime.
It said it wanted the Federal Government to legislate to require that advisers “prominently disclose whether they are truly independent or aligned with a financial organisation”; adding that the exact terms of such disclosure should be based on consumer testing.
The submission then goes on to urge a phase-out period for the commissions which were grandfathered under FOFA and the removal of the current exemptions from conflicted remuneration contained in the Corporations Act and “the ban on asset-based fees received by advisers”.
Comments
...and don't forget a ban on your "referral fees" from the Big Switch which you accidentally forgot to disclose, Choice. What exactly is your problem? You said yourself that subscription for Choice magazine were falling so you decided you needed to supplement your revenue with commissions from promoting the Big Switch. You promoted a company that receives commissions . I think you're way out of your league here and not qualified to comment on complex service arrangements. Fixed goods and chattels...maybe.
Well said Gez.. Industry Super, The New Daily, One big Switch, Adviser Ratings and CHOICE are all conflicted groups run by radical left wingers including the greatest of all, Garry Weaven, but also Whitely, Collins, Koch, Zin, etc.
The beneficiaries? Could they be the same people who are engaged in these highly commercialized enterprises which are waging ruthless commercial WAR against the Financial Planners of Australia, and the Institutional Investment market?
NOT for the benefit of the Members of Industry Super Funds or the hapless who pay good money to CHOICE or Commissions to One Big Switch!
"1984" is with us still in that the bigger the lies the better the publicity and the more likely some will believe it all. It is high time this scourge on our National Economy was eliminated for the good of all Australians
What in the world does Choice know or understand about financial advisers? Stop giving these lefty advocates fresh air. It is a constant attack on an industry under siege by idiots who have possibly never rum a financial planning practice. By the way Choice, we do declare any institutional alignment within our FSG guides. True independency does not exist and nobody is trying to hoodwink the public. All cards are declared during an initial interview.
Ok what about one big switch, it recieves commissions, not just on life and super, but on general insurance, travel insurance , they get 2.00% establishment fees on home loans referred to others, pet insurance commissions etc etc, this is commission reaping at its best! But thats ok, why not ban all commissions not just in super get rid of the lot then see how long a company like one big switch lasts for? PS Choice we already declare everything in the FSG what do you want tattoos on our foreheads? No bank interest here for example?
Industry Funds Super products charge a small flat fee plus a large assets based fee, plus they keep the hard earned Franking Credits created by those members who invest in OZ shares, and they also receive hidden Commissions from Insurance Companies. Will Choice demand an end to this assets based fee practice and the misappropriation of Franking Credits, and the non disclosure of Commissions from Insurance Companies in Industry Funds? No! Their comrades in ISA wood not have a bar of that!
There is no end to this continuous outrageous attack on Advisers who are so important in Australia and who are responsible for arguably the highest standards of quality Advice in the WORLD!
Maybe use of 18c should be contemplated against these critics!
Stick to reviewing dish washers Choice! How can this group proclaim to know anything about the Financial Services Industry! What a joke, and the worse thing is, that the morons in the Senate and ASIC will probably try to take what they are saying on board because they dont know what they are doing either! Is there any other industry in Australia that is constantly attacked to the degree Financial Advisers are?
Choice is farce that the public are not listening to anymore anyway. What a joke, especially when they are conflicted and biased themselves. Pot+Kettle+Black
Self-serving tripe however I wouldn't be against advisers receiving grandfathered commissions having to get clients to sign something to say they are comfortable and aware that commission is being received...
So, so often do I see a new client who was not aware they were paying a commission to an adviser they have never spoken to from their stupidly expensive super fund. If they knew this was the case they would have changed long ago. Previous adviser doesn't want to change them to a more superior product as they would then have to deal with opt-in etc.
Grandfathered everything needs to change but Choice cant be taken seriously.
Choice needs to revise their campaign so that advisers are identified as "aligned" or "non aligned". The term "independent" has been so distorted and outdated by the Corporations Act, most non aligned advisers are not legally allowed to use it, and it bears no resemblance to common English understanding.
Even better, why doesn't Choice lobby for a change to the Corporations Act so that "independent" is defined as "not owned or controlled by financial product providers", which is actually what consumers think it means.
Like the industry funds, Choice view financial planners as a competitor. So anything they say must be viewed in that context.
Paul, the problem is not the Corporations Act definition of independent it is your understanding of independence. Not being owned or controlled by financial product providers does not make you independent. It simply removes that conflict. If you receive commissions or other forms of conflicted revenue you still have conflicts of interest with the client and are thus not independent.
Devils advocate, truly independent advisers do exist, but they number less than 100 out of approx 20,000 authorised reps. Super Guide keep a list if you'd like to find out who they are.
If you receive fee for service you also have a conflict. There is an incentive to provide more service, or more complex service, than the client needs. Not even advisers who meet the flawed Corporations Act definition of independence are free of conflict. All the Corporations Act definition does is provide a valuable marketing tool to a small group of advisers who have a particular type of conflict. It is misleading for consumers.
CHOICE are a bunch of parasites who pay no TAX unlike hard working financial planners :)
@ Jason,
You need a wake up call and a dose of reality.
Charging fees is just as conflicted as commission .. if abused !.
What's the right fee,
1. Is it $100, $200, $300 per hour.
2. Does someone with 2 degrees charge twice as much as someone with one or none ?
3. Is the advice twice as good from someone with 2 university degrees.
4. Verifying billable hours isn't a problem is it.?
Just pick a number out of thin air and multiply it by what ever hourly rate plus incidentals.
If you want to remove all conflict from remuneration, then lets all work for free.
But while your at it, don't forget to include Real Estate agents, car salesman, and every goods and services retailer because no matter how it's disguised, there's as a margin (profit/cost) for doing business, it turns up in one form or another as an undisclosed payment.
Unlike financial planning commissions/fees which are supposed to be declared, the next time you buy a suit, a pair of shoes, a shirt or anything else for that matter, see if you can find out the cost of manufacture is first, then deduct it from your final cost and then you will have some idea how much commission was paid to those involved before it got to you.
Your left wing sanctimonious approach this subject is self serving and needs to be called for what it is.
In our industry you have absolutely know idea !
Choice should probably stick to comparing ThermoMix's and MM shouldn't be quoting them.
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