The corporate regulator, the Australian Securities and Investments Commission (ASIC), has launched a new website today, in which it suggests consumers should avoid paying asset-based fees for financial advice.
The new website, www.moneysmart.gov.au, includes a section on investing and financial advice. Under the heading “Choosing an adviser”, the website urges consumers to check the fees that they will pay for advice.
“Traditionally most advisers have also been paid commissions on financial products you buy,” it says.
“In the end this comes out of your pocket as your investment balance is reduced by the amount of the adviser’s fee. Often the adviser may earn more from a particular product, which may influence them to recommend something that is of greater benefit to them than it is to you.
“These potential biases are known as conflicts of interest. The Commonwealth Government has announced changes to the way advisers will be paid from 2012. It proposes phasing out commissions.
“In the interim you may be offered advice on a commission basis or on a fee-for-service basis. In our opinion, the fee-for-service model is generally a better way to pay for advice. It reduces the chance that the adviser’s recommendation will be biased. A ‘flat dollar’ fee, rather than a ‘percentage of assets’ fee, will give you more certainty and reduce conflicts of interest. It is better if the adviser does not have an incentive to recommend that you invest larger amounts of money.”
The website also provides guidance to consumers on determining whether they need advice in the first place, getting started with a financial adviser, and working with a financial adviser. It also includes links to the Financial Planning Association of Australia’s and CPA Australia’s “find an adviser” services.
ASIC has produced a consumer booklet, entitled Getting Advice.
Moneysmart.gov.au is part of the Government’s National Financial Literacy Strategy, also unveiled yesterday.
This sort of rubbish from ASIC merely confirms what we have always known that ASIC does not like or trust advisers. ASIC is riddled with Consumer advocates and merely reflects the biased opinions of the indivuals who make it up.
It is about time the government either pulled them into line or moved regulation of the industry to a group who at least have some understanding of how it operates and does not automatically assume that we are all crooks.
You don’t want anyone who visits asic website for financial advice as a client. Still,very scary to see how ASIC think.
Why not? I’m somewhat flattered that ASIC’s website these days has come to resemble my own… I’ve been warning about conflicts of interest and recommending flat fees for a decade now. My business is fine!
I enjoy working with well educated and discerning clients. What kind of client do you target?
We need advisers like Travis, as pain in the ass clients work well with pain in the ass advisers like him.
I highly doubt he has any clients at all judging by the amount of repetitious comments I’ve read of his on this forum.
Commissions have to go; however if a client chooses an asset based fee over a fee for service or vice versa, so be it. It’s their money and it is their decision how they want to pay for management advice. An adviser just needs two models to offer their clients, that’s it.
Unfortunately, the majority of Australian’s are so apathetic, a fee for service would not work as they would never get around to writing a cheque; as a result the quality of advice would drop as the adviser would spend most of his time chasing accounts and not advising.
May I add, Commmissions on investments have to go. Risk Commissions need to stay as clients do not appreciate and are not willing to acknowledge the value risk advice provides.
On riak commission, upfront’s need to go but Hybrid’s and Level’s stay.
To remove conflict’s of interest with insurance products:
a. Commissions should be capped at the same amount.
or
b. Each product needs to be ranked by and independant body based on it’s definitions and features. The higher the quality of the contract, the higher the commission the insurer is allowed to pay because it is in the clients best interest to recommend the better contract for them.
“Risk Commissions need to stay as clients do not appreciate and are not willing to acknowledge the value risk advice provides.”
So in other words, your clients fail to appreciate the value of insurance.
The problem there is not with the clients themselves. If you’re an adviser… ADVISE THEM!
It is fundamentally disturbing that a regulator would give such an advice. I wonder when it would start telling people what to invest in!
It is definitely not fair that high income earners pay more in tax and levy, and why should I pay more in stamp duty for a more expensive property and why does insurance premium go up for higher sum insured….
Where can I apply for a flat fee???? Can anyone tell me???
What an Insult – Perhaps the regulator should be telling the Real estate industry to sell all houses on a flat $ basis. Is there any thought given to the cost of running individual advise businesses? (including PI). We have 200 clients paying asset based fees in a fully disclosed ,annually renewable contract with service agreements attached. All in accordance with ASIC requirements and best practice. As a CFP and a Fellow of the FPA with 25years experience.I have amended and developed our business model to best serve our clients interests AND ensure that I have a professional practice from which to do so. Its about time both ASIC and many commentators realise that if you force all advice models to the lowest common denominator, there will be less quality advisers around to look after the “Ordinary Australians” like ourselves – they will all have migrated to the Niche markets where there is less emphasis on costs and more on the broader value of relationships and advice.
from russia with love
we will be lifting fees to justify the extra workloads….consumer loses again-thank julia & buffoons
I am required to disclose my fee levels at both the dollar and percentage amount, regardless of how this is calculated (flat fee or not). Will this not also confuse the client who has visited this site? I agree, stay out of policy making ASIC and start properly regulating the cowboys out of the industry. I am currently dealing with a client who had no idea the level of double gearing he had (a’la Storm variety) and is quite concerned that his portfolio does not match his debt.Spend your time cleaning up this sector of the industry rather than spending resources on limiting commercial transactions.
Guys and Gals, I’ve said it before and I will say it again. The only way you are going to beat this is lobby your local (federal) member. My local guy knows all about this stuff after I briefed him about it.
The greatest irony is that views like this will hurt the very people it is intended to help and if that’s the case, isnt this all just politics?. It aint rocket science folks!
When Real Estate Agents cannot charge a commission, and take on the risks associated with advice of recommending a particular property, then ASIC may have an argument.
“When Real Estate Agents cannot charge a commission”
Ugh… why must people insist on using sales people as the moral benchmark to hold advisers against?
We’re supposed to be fiduciaries!
It’s depressing that a large percentage of advisers seem to think the closest thing to an adviser is someone else flogging stuff for a commission, as opposed to putting ourselves in the same basket as other professionals.
If the legal system adopted the FP industry’s remuneration model the judge and defense lawyer would only get paid if they send the defendant to jail, and they’d get paid a lot MORE if they sentenced people to long terms with hard labour. I bet if that were the case there would be an entrenched lobby making arguments similar to the one here defending that system as a very fair way to compensate judges and defense lawyers for the hard work they put in, and especially for providing an efficient and zero cost service to those people who aren’t found guilty. Nevertheless, there would always be a hint of scandal about the industry and questions about the real reasons why a particular defendant got convicted and whether their harsh sentence was justified.
If accountants worked like that, they’d charge you more for increasing your tax liability. Again, a very fair system if you only have a small amount of taxable income… but clearly a worry if you’re expecting that same accountant to offer good tax planning advice!