In a week that has seen a huge shift in the Australian financial services landscape, we want to know what you think.
Our simple poll question is:
Do you support the Government’s ‘Future of Financial Advice’ reforms package?
Our thanks to the many advisers (and consumers) who have already commented on our initial story (see Government Bans Commissions…). The majority of those comments indicate adviser opposition to not being allowed to determine the nature of their remuneration in a future where they believe less consumers will be able to afford financial advice.
However, the two overriding principles that have guided the Government’s reforms are:
- Financial advice must be in the client’s best interests – distortions to remuneration, which misalign the best interests of the client and the adviser, should be minimised
- In minimising these distortions, financial advice should not be put out of reach of those who would benefit from it
Do you agree that the banning of commissions (except on risk) and the other reforms will achieve the above aims?
Click here to review the Government’s ‘Future of Financial Advice’ reforms package.
Time to have your say…
I think that “we’ should not be too suprised by these new announcements, they coming for a long time.
For those who are each year in touch with their clients in the form of reviews and other communications such as interesting newsletters and the like, have more chance of success to transition their investment clients to the new remuneration format.Quite a few are already in the process.
I have a concern that there will be a tendency in the future for advisers to concentrate only on the middle and higher income earners and so for many people who need advice will possibly miss out.
We shall see I believe many mergers of Dealer groups to obtain scale, especially as volumne bonus payments are likely to cease , although I notice in Bowen’s paper that shelf space monies can be paid, so let’s see how inventive the funds management people can be.
In regards to commission paid for Life insurance products, the rebate or non charge of commission in return for a lesser premium, I believe may work, however possibly only for high income earners who can afford the fees.
It is important that commission is not stopped as it surely will only add or keep the gross under insurance at current levels.
It is interesting to now read commentators actually admitting that Insurance is different to Investments.
The possible advent of a tax deduction for financial advice may assist the fee regime, although i feel that this may not occur soon, maybe it’s in the Henry Tax Review.
It is my understanding that all this has to be passed through the two houses and there may well be significant changes, so I guess, watch this space.
I note with amusement the product providers all saying how great this change is if it was that good why didn’t “they” do it years ago?
I see a major concern with the wording. The ban includes “Any form of payment relating to volume or sales targets (including employee salesand volume targets) from any financial services business, relating to the distribution
and provision of advice for retail financial products.” By specifying ANY Financial Services business, i would like to know how Employee planners are able to receive the fees/comissions they charge if for arguments sake they are on a salary and a % splot of fees over a certain term. This rule is going to affect how planners are employed and not just how they charge their clients. Personally, i am on a flat % of what i generate, can that be argued to be a sales target if the % rate changes based on volume of business written?
Banning of commissions and the other reforms will not achieve the government’s aims because they are ignoring the real problem.
The problem is not remuneration by commission; the real problem is product supplier’s ongoing control of the advice industry.
And the most conflicted remuneration structures of all are salaries paid to advisers employed by product suppliers to push their products.
Can you imagine a medical system where the only access to medical advice was from doctors employed by pharmaceutical drug companies to push drug products?
However that is the structural norm in the financial advice industry.
For consumers the only significant access to financial advice is from advisers employed or licensed by financial product suppliers. The employment opportunities for financial advisers are increasingly dependent on working for a product group to push their product.
Product control of advice ensures that advice will not be in the best interests of the consumer because it remains secondary to the placing of products by the adviser.
Product control of advice ensures that advice will remain incidental to product sales and not be universally available. No sale no advice.
providing that a level playing field exists with all service providors then fine. every time consumers have to purchase prescriptions from pharmacists why is the generic brand pushed ? what type of incentives and kick backs do the pharmacists receive ? why do we pay $ 2.50 for a can of coke that the merchant acquires for less than .40 cents ? the list goes on. the real issue is not what we get it is what we nett !advice some consumers confuse with information and advice needs to be recognised for the value over the long term. too many consumers and advocates see the investment timeframe all too short, consumers need to appreciate that a sprint is totally different to a marathon. when it comes to providing protection for clients people still need to be sold the things they really need.
Comments are closed.