Fees. Commissions. Trails. Percentages. Revenue. Commissions. Splits. Shelf Fees. Dealer Rebates. Commissions. Volume Bonuses. Commissions. Commissions. Commissions. Blah. Blah. Blah.
It took about three months in planning to decide that the endless discussion about revenue and payment methods was tireless, counter-productive and damaging to the industry. In the time since, the argument has been ‘settled’ some three times, waged a further four times and dismissed, well, countless times.
We all know the issues. We all know the commercial reality. We all know how things are headed. So, you know what? I’m calling it:
The fees versus commissions debate is dead.
Kaput. Finished. Expired. Past due. Horizon-bound. Dead. Like a damned doornail.
And the best part? It was the wrong argument the whole time.
We all know commissions are trouble for the industry. We all know that fees are the unavoidable future for financial planning. The FPA and the government have ensured the death of commissions. Now we have the rise of percentage-based fees (surely just as insidious and damaging as commissions?) and fee-for-service.
But we’re still fighting the wrong fight.
Arguing about how somebody is paid is only relevant when we’re discussing conflicts of interest. This facet of the argument has been made – I’d be surprised to find that more than 2 in every 10 people you ask don’t think planners get paid from product manufacturers. So let’s trust clients to realise this and make an informed decision about their adviser.
Arguing about what somebody is paid is relevant to two parties, for two reasons. It’s relevant for clients, because they need to know so they can make a reasoned decision about what their planner is being paid. And it’s relevant for planners because, as business people, we need to know what we’re getting paid and what the bottom line is. When it comes to that professional relationship, anybody else’s opinion is redundant.
But arguing about why somebody is paid is far more relevant and, I would argue, critical to the long-term success of the financial planning industry. As an industry we need to get better at demonstrating, explaining and quantifying the benefits our clients get from working with us. We all know what we can do for our clients – but let’s get on the front foot and explain that to the public.
The public knows what accountants do, they know what solicitors do, they know what doctors, dentists, physiotherapists, psychologists, bookkeepers, mortgage brokers and insurance brokers all do. So, until planners get out there and fight the commission-hating naysayers and self-interested lobby groups with the wonderful and extraordinary benefits of financial planning, we’re doomed to a career of defending ourselves from increasingly pointless accusations.
In response to my post last week about the ISN and their attacks on planning, William Mills made the simple statement that he has no difficulty communicating their Client Value Proposition to clients.
In a world where we waste our time arguing about how we’re paid, and what we’re paid – how confident are you that, like William Mills, you can tell your clients why you’re paid?
