Login
ISCOVER
Staff Reporter
Fee for service is a more ethical and transparent way to charge customers, one industry stakeholder has claimed.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
Speaking about the financial planning industry, Australian Capital’s managing director Barry Parker said fee for service was appropriate in the current environment.
Under the new Future of Financial Advice legislation, planners are being advised to charge a fee and move away from the commission-based model.
While many planners have complained about the legislation, Mr Parker said the best performing individuals and companies will adapt to the legislation without it damaging their business.
“Every industry has to accept that conditions change over time. Successful people in any industry are able to adapt to those changes and move forward.”
Mr Parker believes that the basic problem with the financial services industry in Australia today is that most advisers are licensed through companies owned by product providers. They are incentivised in a number of transparent and not-so-transparent ways to recommend their owner's products and this may conflict with their client's best interests.
“Advisers who are paid by commission (majority of the industry) almost always recommend products via which they can be paid commission. Clients deserve unbiased advice (and where appropriate, products) from a professional rather than a salesperson,” he said.
For this reason Mr Parker considers fee for service a more ethical and transparent way to charge customers.
FoFA legislation will hopefully highlight the need for customers to seek quality advice.
“Unfortunately the last set of statistics I saw showed that 86 per cent of the money invested in Super went to the default investment. There are so many Australians out there who are not receiving any financial advice at all,” Mr Parker said.
“To change customers’ minds about the costs and benefits of financial advice, a company needs a strong value proposition and a path forward that helps them envisage the future,” he said.
