Paying up-front will avoid dollar-draining commissions
CHOICE says Australians should use Financial Planning Week as an opportunity to start a lifetime of real savings by negotiating to get financial advice minus any commissions that sap their savings.
Reforms around financial advice mean an official end to commissions which can seriously dent superannuation and other investments will not come until July next year.
However, CHOICE says Australians are free to negotiate fee paying arrangements with advisors free of on-going commissions and asset fees that corrode their nest egg.
“It’s very tempting for someone to avoid up-front financial advice charges, thereby letting less obvious ongoing fees and charges take care of the cost. We believe that’s a false economy,” says CHOICE Campaigns and Communications Director, Christopher Zinn
“A one percent asset-based fee doesn’t sound like much but it has the same effect on accumulation as a contributions fee of 17% - this is the reverse effect of compound interest!”
The reforms to the financial advice sector also mean that advisors must always act in the best interests of their clients.
“Those working in the financial planning industry should accept that true professionals do not have conflicts of interests that adversely affect their clients,” says Mr Zinn.
CHOICE has been campaigning for 20 years to bring about genuinely impartial and high quality financial advice for Australians. The consumer watchdog says the reforms offer real opportunities for growth by reputable industry players.
“We want the industry to respond to consumer demand for impartial strategic advice. This opens a whole new market for advisors who can deliver services on a professional and ethical basis,” says Mr Zinn.
CHOICE says that any diluting of the intent of the financial advice reforms will continue to undermine consumer confidence in the industry.
“No one wants to see a repeat of the misconduct of some advisors that we’ve seen in the past, including the Storm Financial and Westpoint and Trio fiascos. Instigating a financial services compensation scheme is simply a band-aid and it does not go far enough,” says Zinn.
Christopher Zinn: 0425 296 442 or Ingrid Just: 0430 172 669