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Late last year, there was some criticism in both the mainstream press and financial planning circles, regarding the merits of commissions and fees (I know, criticism of financial planning - surprise, surprise). 

Many of the points make reference to a report by Roy Morgan research - Superannuation and Wealth Management - which revealed that in the four years between 2005 and 2009, financial planners from the six largest financial institutions - the big banks, AMP and AXA - directed more than 70% of sales into their own products.

This figure, expressed in isolation, does suggest that something is amiss and many of the commentators criticising this percentage express some doubts as to the ‘fairness’ of such a system. But how does this criticism stack up against other information?

How Terrible.

Let’s look at the reality of what institutional planners face:

• legally, they're only allowed to recommend products on their employers Approved Product List (APL). Why would a bank have another banks products on its APL? That's effectively saying they don't have the best product. They’re not, generally, in the business of recommending other companies products.
• if I go into an ANZ branch, I expect to deal with ANZ people telling me about ANZ products. I don't know if I'm unusual in this expectation, but it seems there're a lot of people that expect something else.
• there are, or at least there were whilst I was there, targets for planners to achieve that normally relate to the volume of business they write. But before we persecute these bank planners, let's remember that most other financial planning businesses have similar structures in place. (If you ever get the chance, be sure to ask the most vocal critics of the banks for their remuneration and incentive structures for their staff.)

That's Just How It Is...

I'm the last person to defend the status quo. Logic dictates that it’s impossible for each bank to have the ‘best’ product for 70% of the clients they see - so I’ll accept that this part of financial planning could be improved. But I have an immediate suspicion of critics that adopt the slightest holier-than-thou tone in their remarks. 

Always question the criticism.

Dig deeper, and you’ll find that many of the people harping on about the evil of commissions and planners concentrating their product recommendations see nothing wrong with charging their clients percentage-based fees - something I have serious issues with.

The bigger issues, in my mind, are

• the value that clients get for the fees they pay, and
• making sure that the strategic advice (not the product) is at the forefront of the planners  mind.

Hypocrite, or Hypo-Critic?

As for this critic of the system, I've said it before - we do not charge new percentage fees or accept commissions on superannuation or investments. We do accept insurance commissions, for the reasons outlined in our Operating Principles.

I'm happily upfront about this situation with my clients and openly criticise those that charge percentage-based fees, because I can demonstrate to my clients the value we bring to their financial situation, and all of our advice is based upon the strategies they need, not the products we're selling.

Be sure to question the critics.

One of Australia’s oldest and best known dealer groups, RetireInvest, is to undergo a restructuring and rebranding, designed to improve the profitability of its practices and attract new firms to the group.

The chief executive of RetireInvest, Paul Campbell (pictured), says the move will reinvigorate the 30-year-old group, and deliver better quality advice to clients. He says the restructuring will help RetireInvest firms “double or triple the size of their business in the next three to five years”.

A minimum of 20 per cent of the dealer group profit will be made available to RetireInvest proprietors in the form of an equity alignment scheme (EAS), or profit-share scheme, which Campbell says demonstrates that the interests of the dealer group are to be closely aligned to those of RetireInvest proprietors.

From January 1, 2010, RetireInvest will be rebranded RI Advice, reflecting a push by the group to expand beyond its traditional market of retirees into wealth accumulators.

However, the RetireInvest brand will not vanish. Existing RetireInvest practices are free to retain the current name, adopt the new name, or co-brand their business with both. In addition, the group will offer a “white label” option, allowing existing planning firms to retain their existing names or brands, but become corporate authorised representatives of RI Advice.

Campbell says each RetireInvest proprietor will be free to make his or her own decision. The decision will depend on the value they perceive in the RetireInvest name and the market they intend to target.

“We are not abandoning the brand RetireInvest,” Campbell says.

“[But we are] operating in the broader market, not just the retiree market. It sends the message that we are about holistic advice, not just retirement. A good business needs diversity of revenue.”

Existing RetireInvest proprietors will be continue to have exclusive use of the RetireInvest brand for their respective territory. New entrants to a RetireInvest territory will have to use the RI Advice brand, or continue operating under their existing practice name.

Campbell says RetireInvest “probably hasn’t done a lot in the last five to seven years” to help its practices grow and expand. A number of the steps it has recently unveiled have been designed first of all to ensure its existing proprietors perceive that they’re receiving appropriate value for what they pay to the dealer group.

RetireInvest has brought its research function in-house and appointed a number of specialists – including Col Fullagar on the risk side of things, and Strategy Steps for technical advice.

Campbell says RetireInvestors “primary objective” is to assets the growth of its existing practices. He says this will be achieved by helping firms to make acquisitions, and by providing support to maximise revenue and profit.

“We needed to reinvigorate and get growth at a number of levels,” Campbell says.

RetireInvest will move to a fee-for-advice model, to diversify its firms’ revenue streams and to ensure there is complete transparency in the offering to clients.

“Clients should be able to make the decision as to whether they are getting value for what they’re paying,” Campbell says. “Fee-for-advice is transparent: the client knows what they are paying for, and it’s linked to a value proposition that they can understand.”

RetireInvest currently has about $9 billion of funds under management or advice. Campbell says the group’s expansion plans are “not just about FUM”. Although some revenue will continue to be based on assets under advice, Campbell insists profitability depends on diversifying revenue streams, understanding the cost of providing a service, and pricing the service appropriately.

“When we talk about growing our proprietors, we’re talking about profit,” he says.

One of Australia’s oldest and best known dealer groups, RetireInvest, is to undergo a restructuring and rebranding, designed to improve the profitability of its practices and attract new firms to the group.

The chief executive of RetireInvest, Paul Campbell, says the move will reinvigorate the 30-year-old group, and deliver better quality advice to clients. He says the restructuring will help RetireInvest firms “double or triple the size of their business in the next three to five years”.

A minimum of 20 per cent of the dealer group profit will be made available to RetireInvest proprietors in the form of an equity alignment scheme (EAS), or profit-share scheme, which Campbell says demonstrates that the interests of the dealer group are to be closely aligned to those of RetireInvest proprietors.

From January 1, 2010, RetireInvest will be rebranded RI Advice, reflecting a push by the group to expand beyond its traditional market of retirees into wealth accumulators.

However, the RetireInvest brand will not vanish. Existing RetireInvest practices are free to retain the current name, adopt the new name, or co-brand their business with both. In addition, the group will offer a “white lable” option, allowing existing planning firms to retain their existing names but become corporate authorised representatively of RI Advice.

Campbell says each RetireInvest proprietor will be free to make his or her own decision. The decision will depend on the value they perceive in the RetireInvest name and the market they intend to target.

“We are not abandoning the brand RetireInvest,” Campbell says.

“[But we are] operating in the broader market, not just the retiree market. It sends the message that we are about holistic advice, not just retirement. A good usiness needs diversity of revenue.”

Existing RetireInvest proprietors will be continue to have exclusive use of the RetireInvest brand for their respective territory. New entrants to a RetireInvest territory will have to use the RI Advice brand, or continue operating under their existing practice name.

Campbell says RetireInvest “probably hasn’t done a lot in the last five to seven years” to help its practices grow and expand. A number of the steps it has recently unveiled have been designed first of all to ensure its existing proprietors perceive that they’re receiving appropriate value for what they pay to the dealer group.

RetireInvest has brought its research function in-house and appointed a number of specialists – including Col Fullagar on the risk side of things, and Strategy Steps for technical advice.

Campbell says RetireInvestors “primary objective” is to assets the growth of its existing practices. He says this will be achieved by helping firms to make acquisitions, and by providing support to maximise revenue and profit.

“We needed to reinvigorate and get growth at a number of levels,” Campbell says.

RetireInvest will move to a fee-for-advice model, to diversify its firms’ revenue streams and to ensure there is complete transparency in the offering to clients.

“Clients should be able to make the decision as to whether they are getting value for what they’re paying,” Campbell says. “Fee-for-advice is transparent: the client knows what they are paying for, and it’s linked to a value proposition that they can understand.”

RetireInvest currently has about $9 billion of funds under management or advice. Campbell says the group’s expansion plans are “not just about FUM”. Although some revenue will continue to be based on assets under advice, Campbell insists profitability depends on diversifying revenue streams, understanding the cost of providing a service, and pricing the service appropriately.

“When we talk about growing our proprietors, we’re talking about profit,” he says.

One of Australia’s oldest and best known dealer groups, RetireInvest, is to undergo a restructuring and rebranding, designed to improve the profitability of its practices and attract new firms to the group.

The chief executive of RetireInvest, Paul Campbell, says the move will reinvigorate the 30-year-old group, and deliver better quality advice to clients. He says the restructuring will help RetireInvest firms “double or triple the size of their business in the next three to five years”.

A minimum of 20 per cent of the dealer group profit will be made available to RetireInvest proprietors in the form of an equity alignment scheme (EAS), or profit-share scheme, which Campbell says demonstrates that the interests of the dealer group are to be closely aligned to those of RetireInvest proprietors.

From January 1, 2010, RetireInvest will be rebranded RI Advice, reflecting a push by the group to expand beyond its traditional market of retirees into wealth accumulators.

However, the RetireInvest brand will not vanish. Existing RetireInvest practices are free to retain the current name, adopt the new name, or co-brand their business with both. In addition, the group will offer a “white lable” option, allowing existing planning firms to retain their existing names but become corporate authorised representatively of RI Advice.

Campbell says each RetireInvest proprietor will be free to make his or her own decision. The decision will depend on the value they perceive in the RetireInvest name and the market they intend to target.

“We are not abandoning the brand RetireInvest,” Campbell says.

“[But we are] operating in the broader market, not just the retiree market. It sends the message that we are about holistic advice, not just retirement. A good usiness needs diversity of revenue.”

Existing RetireInvest proprietors will be continue to have exclusive use of the RetireInvest brand for their respective territory. New entrants to a RetireInvest territory will have to use the RI Advice brand, or continue operating under their existing practice name.

Campbell says RetireInvest “probably hasn’t done a lot in the last five to seven years” to help its practices grow and expand. A number of the steps it has recently unveiled have been designed first of all to ensure its existing proprietors perceive that they’re receiving appropriate value for what they pay to the dealer group.

RetireInvest has brought its research function in-house and appointed a number of specialists – including Col Fullagar on the risk side of things, and Strategy Steps for technical advice.

Campbell says RetireInvestors “primary objective” is to assets the growth of its existing practices. He says this will be achieved by helping firms to make acquisitions, and by providing support to maximise revenue and profit.

“We needed to reinvigorate and get growth at a number of levels,” Campbell says.

RetireInvest will move to a fee-for-advice model, to diversify its firms’ revenue streams and to ensure there is complete transparency in the offering to clients.

“Clients should be able to make the decision as to whether they are getting value for what they’re paying,” Campbell says. “Fee-for-advice is transparent: the client knows what they are paying for, and it’s linked to a value proposition that they can understand.”

RetireInvest currently has about $9 billion of funds under management or advice. Campbell says the group’s expansion plans are “not just about FUM”. Although some revenue will continue to be based on assets under advice, Campbell insists profitability depends on diversifying revenue streams, understanding the cost of providing a service, and pricing the service appropriately.

“When we talk about growing our proprietors, we’re talking about profit,” he says.