FPA farewells commission based renumeration
Consumer group CHOICE welcomes the Financial Planning Associations’ announcement.
Consumer group CHOICE welcomes the Financial Planning Associations’ announcement today that commission-based remuneration for financial advisers is on its way out, but warns the industry needs to make a clean cut with conflicted remuneration.
“The only payment a financial adviser should receive is from their client and that payment should pay for a service," said Elissa Freeman, senior policy officer.
“Commission-based remuneration has failed consumers. But we don’t want to see commissions replaced by a remuneration model that replicates the same failings.”
CHOICE is concerned that asset-based fees may overtake commissions as the payment preference of advisers. Asset-based fees charge the customer a proportion of the funds under advice, rather than a fixed fee for a service.
“Asset-based fees bear no relation to the work or services provided by the adviser. Worse yet, the remuneration model favour strategies that involve debt and gearing to maximise adviser revenue.
“Customers were burned by the commission-fuelled Storm Financial because of the incentives for advisers to maximise funds under management. Asset-based fees risk replicating the same perverse impacts.”
CHOICE has welcomed the commitment from the Financial Planning Authority to reform remuneration structures.
“More and more Australians will be seeking financial advice in coming months and years ahead and it is essential that advice comes from an industry that is conflict free.”