It was only 300 words long, but an article posted on Professional Planner Online recently sparked a furious debate. The article revealed that the Australian Securities and Investments Commission’s new retail investor website, MoneySmart, warns consumers against paying asset-based fees for advice.
The full range of responses can be viewed at Professional Planner Online. Some support asset-based fees and some oppose them; some support the regulator’s stance and some condemn it.
But if we put to one side for a moment the specific issue of asset-based fees – that’s a subject that could fill an entire edition of this magazine – we need to look at the role being played in this debate by the regulator.
In this month’s cover story, ASIC commissioner Greg Medcraft says that in the context of the debate around opt-in, it’s ASIC’s job to enforce the law. He says that whether or not opt-in is “best practice” is a legitimate matter for debate, but it’s not ASIC’s job to say.
On the issue of asset-based fees, though, the regulator apparently has fewer qualms.
Asset-based fees are currently permitted under proposals contained in the Future of Financial Advice (FoFA) package. Whether asset-based fees are best practice is, like opt-in, a legitimate matter for debate. But unless such fees are banned, is it ASIC’s job to express an opinion?
It’s one thing for the regulator to express an opinion in a submission to an inquiry or similar forum; it’s another thing to be expressing an opinion to consumers.
Asset-based fees look like being the next front in what the Minister for Financial Services and Superannuation, Bill Shorten, has described as the Financial Planner Wars.
As Professional Planner was being readied for print, Industry Superannuation Network (ISN) unveiled the next phase of its public campaign on financial advice. ISN plans to encourage greater numbers of super fund members to seek advice from their funds.
Its announcement says, in part: “Industry super funds offer their members ‘intra-fund’ financial advice on their super as an important service, and offer holistic advice on a genuine fee-for-service basis.
“Industry super funds do not pay commissions or ongoing asset-based fees to financial planners.”
We know the industry funds’ campaign against commissions was a success – or at least, contributed significantly to the regulatory reforms that will soon see commissions abolished. Now they’re gunning for asset-based fees – and ISN’s cause will be helped, as long as ASIC continues to promote alternative methods of payment.
But forewarned is forearmed. If asset-based fees are your preferred method of getting paid then it’s time to get your rationale and your explanations ready, because it seems more likely that you’re going to be questioned on it, and asked to justify yourself.
I suspect that the answers had better be convincing, and that they had better make it clear to clients why asset-based fees are an appropriate way to pay for professional services.
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Professional Planner’s tagline – those little words under the masthead on the cover – is “Standards, education and practice profit for fee-based advisers”. In keeping with the second part of that promise – education – I am pleased to introduce a new feature to the magazine.
Starting this month, Professional Planner offers you continuing professional development (CPD) content. The first CPD article is on margin lending. After you’ve read it, follow the directions at the bottom of the article to obtain a website login, where you can answer a series of questions and – assuming you get the answers right – you’ll receive CPD points for your trouble.
Seeing as you read Professional Planner every month anyway – don’t you? – this is a relatively painless way to rack up the points you need each year.
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This edition of the magazine is due out a few days before the Financial Planning Association of Australia (FPA) holds its extraordinary general meeting on a new membership structure. By the time you receive it, electronic voting on the restructuring proposal will have opened. For reasons that I have gone into before, I urge you to vote now, if you haven’t done so already and if you will not be attending the EGM in person.
I attended one of the FPA’s roadshow events, in Sydney a couple of weeks back, and took the opportunity to have a chat to a few members on the way in and on the way out.
What struck me was how engaged they were. A couple of those whom I spoke to I’ve known for a while. I’d never have defined them as card-carrying members of the FPA. Their membership was almost grudging – they had to be a member so they could maintain their Certified Financial Planner (CFP) status.
But their enthusiasm for change was infectious; their desire to take control of their professional destiny was palpable; and it was clear they sensed that they had a once-in-a-generation opportunity to be instrumental in fundamental change – change that will make it far harder in future for anyone other than individual professional planners to dictate to other professional planners how they should operate and what standards they should adhere to.
A “Yes” vote is in no way a foregone conclusion. But I fervently hope that’s what Mark Rantall and the FPA board get in Melbourne on April 7.
Simon Hoyle
simon.hoyle@conexusfinancial.com.au
