CHOICE applauds financial advice reforms

Consumers will benefit from conflict-free financial advice

CHOICE says that consumers will be the winners as a result of the federal government’s decisive action to end commission-based remuneration for financial planners.

It says more households will now have the confidence and trust to engage with planners in a more transparent and effective way.

CHOICE believes the reforms will help drive innovation, competition and efficiencies in the advisor community which means upfront fees for service need not, as some have claimed, be unaffordable.

The consumer group has argued over many years that commissions create an unacceptable conflict of interest for financial planners which can lead to dangerous or poor quality financial products being sold to consumers.

It has been campaigning for planners to have fiduciary obligations which legally require them to operate in the best interests of their client. CHOICE has also argued against the growth of asset-based fees which are paid by the client to the adviser as a percentage of the total funds under advice.

“The government’s plans incorporate many of the recommendations we made to the parliamentary joint committee on financial services. We are particularly pleased that asset-based fees will not be levied on geared products,” said CHOICE spokesman Christopher Zinn.

“But we remain concerned that the industry is attempting to transition from commissions to asset-based fees. Our preference is for fixed fees which could be either a fixed lump sum or hourly rate charged by the adviser to the client.”

CHOICE also welcomes an inquiry into a last-resort compensation scheme which it believes is urgently needed and would have benefited consumers who have been waiting years for justice after high profile collapses including Storm Financial.

It says a last-resort compensation fund is an essential element of any reforms. It would not be designed to compensate consumers for poor performing investments but for when licensees have breached their license conditions and are otherwise unable to provide any compensation.

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