After extensive debate, the vast majority of advisers are still saying they want to retain commission remuneration.
The latest riskinfo poll reveals 77% of advisers (at time of publishing) do not support Ripoll Inquiry Recommendation 4, regarding ceasing payments from product manufacturers to financial advisers (21% support the Recommendation, 2% not sure).
Some comments from advisers refer to the issue of transparency, rather than payment structure:
“Payments should still be allowed to be made via the product manufacturer, but directly from the clients funds with transparency on the clients statements. I agree that all hidden trails, overides etc should be abolished.”
“As long as the client fully understands what his total fees are it doesn’t matter how we are remunerated.”
Other comments relate to the profitability of a practice and the underinsurance issue:
“Small trails and service fees support the ongoing viability of our businesses so that whenever a client needs help- we are there and viable to provide it. Client’s that decline fees will still come and demand help as quickly as a client paying regular service fees/ and complain (litigate) when they have not received advice (that they wont pay for).”
“If commission payments are ceased from risk products there will be a massive under insurance issue in Australia and people would never be insured due to not being able to afford the fee to get it implemented.”
Another adviser has raised the issue of how clients turning off service fees in future may impact the adviser’s Professional Indemnity cover:
“…would all our PI requirements and liability to the client cease when they turn the fee off?? I doubt it, so once again we’ll have all the responsibility, but no remuneration.”
Whatever your point of view, it’s not too late to have your say. Do you reject all remuneration by commission? Do you support commissions to continue? Do you think commissions should be restricted to risk products only? Make your voice heard, because the debate is not over:
Given the opportunity many clients will happily avoid using an advisor (and pay fees/ commissions) to minimise costs (look at industry fund marketing)- being uninformed, they will make blunderous mistakes and further wreck this industry!! Seeking advice should be a requirement not a choice!!
I base my business on giving service. I do not charge initial fees on investments and are in due course remunerated via trails……as long as I continue to discuss the issues and investments with the client I feel I earn the remuneration via the trails which are fully disclosed up front, discussed with the client and agreed upon……If the investment or insurance is not placed I will charge a fee for service for my time at a reasonable hourly rate of $70 per hour and not some ridiculous hourly rate which cannot be justified.
With insurance I get paid via the product which is fully disclosed and discussed with the client in terms of initial and renewal…..The renewal is justified in terms of servicing and advice.
As you can see my entire business relies heavily on trail and renewal commission because it is a business giving service and more concerned about keeping clients rather than switching clients and chasing clients…….I feel the current remuneration of commission as a choice is fine as long as all is disclosed to clients up front and in on-going staements which they receive.
I hope my comments help with the debate.
Please feel free to contact me to further discuss.
Rob O’Brien (CFP).
Lifewise program was launched due to underinsurance. If clients have to pay for risk advice underinsurance will become worse.
I have a business where I have purchased 4x client books since 2001,and each of these businesses is its own cost centre,and I would just like to say that the happiest clients are those that pay commissions ,exept for all this negative crap they keep reading about currently,I just send them the articles from the papers and in particular the most recent from NAB in one of our known industry rags were they rebate the trial to.66% and then replace with a 1.1% advisor service fee,I have in all my 33xyears in this business never heard such a hollow argument that will, and can only ever damage the client more than us the advisor in all my time in this industry,quite frankly if this is all the FPA and other regulators have to run on then I say go get a job,because you are just time wasters who are so far from reality quite frankly you just dont rate in the bigger picture of advisor client relationships,print if you wood like.
It is easy to adopt a fee for services if the adviser is working for an institution with established clientele.
How would expect an adviser who operates individually and has to get his own clients to work on a fee base? It is OK if he has an established clientele. What if he hasn’t a client base? Imagine, the adviser telling his prospective client that he/she will be charged even before they decides if they want to do business.
Why should an adviser recommend a superannuation fund? So are the clients the advisers’ clients or the superannuation funds’ clients? Why should the adviser work for free?
The best solution to all these garbage is to nationalise the retirement fund and have it managed by the Commonwealth Government. No more fees, no advice needed and cut-off all the red tapes, just like the Singapore government Central Provident Fund.
Sick and tired of all the greedy pigs who wants business, pay themselves million dollars salaries but don’t want to pay for the business. What a lot of bull****.
I run a business that supplies insurance advice to my clients and an implementation service of that advice. I offer my services free of charge to my clients, that is they do not pay anything until they get their product [the insurance]. I take on the cost of providing the advice, documenting the advice, implementing the advice and negotiating on behalf of the client with the insurers of that advice [exclusions etc]. Then and only then at the very end of the process does the client make their first payment to the insurance company.
The insurance company then makes a payment back to me which covers my costs and hopefully allows a small profit. The cost to take a client through this process is a minimum of $2,000 [compliance being what it is] for a standard client but far greater for more difficult cases.
Please tell me would a client be comfortable to pay this $2,000 amount on top of his insurance bill? Yes the premium might come down by 30% but the cost differential is still around 100% to 200% more than they would have paid.
Would the client be comfortable to pay the $2,000 [minimum] to run themselves through the process and be declined at the end of the process ie the $2,000 is not refundable?
Would the client be comfortable to increase their insurance cover next year after a review when the additional insurance premium is $1,000 and they get an additional charge of $2,000 to implement?
The list can go on but in essence the client is actually getting a great outcome – they don’t wear the risk and they don’t pay unless they get the product. Why change the current process that actaully works best for the client.
I do think we should change the name of how we are repaid for our work – change the name from commission to remuneration. We will then be paid for our advice, time, effort, risk, service and compliance. Sounds good to me!
THIS MESSAGE HAS BEEN WRITTEN BY AN INVESTOR unlike all the other messages on this site which seem to have come from advisers.
I am not comfortable paying any sort of adviser fee or commission. If this is to be paid then it should come from the super fund or insurance company.
Too many investors have been charged rather large upfromt commissions or fees for service only to see their funds whither. In the environment we have seen in the last year or two, you advisers should have been investing clients in CASH/SECURE/GUARANTEED investments. Instead many put their clients in SHARE type investments and look how much people have lost. It will take years for some of these to just get back to their inital investment amount, but you’re still getting your contribution or monthly adviser service fee.
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