The much-anticipated guidance confirms that ASIC will accept an application for approval of a code with limited content – for the purposes of FOFA only – offering a checklist of code content that “obviates the need” for complying with the opt-in requirment.
“A FOFA code approved under our policy will provide a flexible alternative to complying with the opt-in requirement,” said ASIC Commissioner Peter Kell.
“In particular, under a FOFA code ongoing client arrangements may not terminate in the same way that they do under the law.”
However, the guidance also makes clear that “approved FOFA codes must meet substantially the same policy objective as opt-in: that is, they must promote client engagement and ensure clients do not pay ongoing financial advice fees where they are receiving little or no service.”
ASIC will publish guidance on the FOFA conflicted remuneration provisions on Monday 4 March.
Dave & Johnno i see your point, but when you hear radio adds saying we are independent and then disclose saying we r charter (amp)
The industry still has long way to go before its is seen as professional in the same way lawyers & accountants.
Also why should a regulator tell you had to charge for your services. I am tring to think of other professions that a forced in to this. Let the client decide how they want topay. very frustraing when u pick up new Whats the strategey??? Strategy 1st the vechile deliver the strategy is 2nd but it appers the other way around
How about you re-read my posts Philip and see my balanced perspective on things…rather than blindly accusing me of “not getting it”. Careless comments by you…both of them.
How about you tell us how you operate….or are you sort of Labor troll?
I completely agree with Ang in relation to:
1. We should be paid solely by the client and no other means (i.e. not by provider).
2. Obatining licence to practice is way too easy. Should be min. uni course like accounting, etc before being allowed to practice. Consider what we are dealing with, peoples life savings!
Sadly, I think perhaps about 10-30% of planners would be okay for my wife to see if I died. I’d be scared as hell if she ran into the other 70%. Luckily, I think the % of professional, strategic advisers (rather than just sales people) has been increasing and we are moving in the right direction toward a profession, but we are still a long way off and that (inc. the 70%) is mainly due to sales people being given adviser roles after a few short courses rather than havinga passion for planning and studying and learning on the job (i.e. paraplanner) for years first.
Phew – looks like I stirred up (another) hornets’ nest! Good to see the conversation happening and the shift occurring from what was once a defensive position to a more creative one. Gerry will eventually “get it” or get out and the rest of you are discussing best/better ways of practicing – all good.
RE ALIGNED ADVISERS I think this is a non-issue. With competition the top 5-6 products are much for muchness, no matter what one provider will tell you about how they excell. And with banks, etc, clients go to NAB expecting an MLC product, clients go to CBA expecting CFS, AMP = AMP, etc. I don’t go to a Ford dealer and look for a Holden… I think clients take great security from the branding on the product, especially after recent years and lets be honest, industry funds are generally crap (for those engaged with their retirement planning), retails funds are ok and wrap accounts are good, SMSf’s are great where appropraite. But within each catergory, there really is little difference between the better providers.
I’m a Ford man through and through, but I’m also smart enough to know that other than the looks, there really isn’t much difference between the latest Ford and latest Holden – just how they look and are advertised. The engineering/capabilities r about same.
I’m enjoying the healthy debate here. I personally think fixed fees are the way to go but also concede that far more important than hows fees are paid is that the client gets sound advice and pays a fee that is appropriate and understood.
Dave, hopefully my last post answered some of your questions. I will charge a set fee for strategy and upfront advice. I take an active management approach with portfolios when they are in place. The majority of my clients are pre and post retirees and just happen to have investments that i manage. If someone wants advice on gearing up with property in a SMSF i’ll charge a fixed fee…simple, but i’m not really in that marketplace. How do i cope when markets fall 50%…well, you know…client has less I have less…I aim to minimise their losses and try to recoup in the good years….like any business. I’m not sure clients would like to get my CPI adjusted fixed fee when their account based pension is dropping rapidly because their annual review isn’t due for another nine months. That’s the way I look at it anyway.
i would like to throw in the meaning of a Independent advisor?? so to be independent you no longer take commissions, but if you belong to a Major bank/Financial institution or white labelled are you really an Iddependent advisor. less 10% of advisors are non- alinged . Some thing is missing as client in my view donot care how you get paid as long as its disclosed. The client would be more interested if your aligned or not aligend ( or as i feel the regulators should called it independent or not) not by the way you are paid??? diploma of financial service is a joke, try to became lawyer or accountant with such limited qualifications
To qualify as accountant 3 yr degree plus poat gread atudies take around 4.5 years to quailfy or do a fast track 2 week courtse & bang you qualified.????
I don’t disagree with you Terry on those points. I’ll ignore the other “professions”(cough)for now. How one charges should not determine their level of professionalism…can we agree on that too.
I don’t write risk (i outsource that), i just do investments and super, that’s all i do…i like to think i specialise in creating tax effective portfolios with reliable income.
For doing this level of work i mostly charge a percentage based service fee. Being ethical in nature i am not trying to sell more products so i get paid more or gearing them up so i get paid more. I will charge a set fee for strategy and implementation, but ongoing i find percentage is appropriate and my clients think the same. I have an undergrad and post grad degree in business.
I’m not threatened by FoFA….just disturbed that i think it is wasted policy. So much better reform could have been made that wasn’t.
Dave – thanks for your comments – appreciated – I am just trying to work out a fee for service insurance model that is workable and am looking for different approaches and experiences with what works and what does not – cheers
Joe, there are some real hurdles with fee for advice re insurance. I acknowledge the massive under-insurance problem in Australia and I also understand an initial fee can be something younger couples are hesitant about, but I see fin. planning as a long term relationship and frankly, if a client cant see the value in paying a bit upfront to save 30% forever, then they are not forward thinking enough to be my clients and I wouldn’t want them on board. There are enough people out there who need cover so I don’t need to be everything to everyone, I run my business well and understand and am willing to let X% of prospective clients walk away/go elsewhere rather than alter my fee model to suit them.
Dave – thanks for that – so do you charge an initial fee for advice, strategy and initial implementation and then if issues crop up charge for additional time or just absorb this additional time spent??? For higher income / net worth clients I have tried offering a fee for service alternative for insurance and found it works but for say a basic IP cover for a younger person I find that they find a fee a bit harder to get across the line – again – any constructive comments appreciated.
The opt in regime will force all advisors to explain the “value add” aspect of their advice, in accounting it is implied by the need to be ATO compliant as a user of account services in FP it is not as clear to the consumer, so my suggestions to my FP client firms is to start developing a realistic “value add” strategy and proposal to roll out to the clients they really want to retain. MGFCG
INSURANCE DISCOUNTS – Remember, clients get ~30% discount on their cover for the life of the policy when no commission is there. This means either that cover is significantly cheaper over time for them OR IMPORTANTLY, that they dont need to feel like they cant have the cover they require due to cost. I think its a bit rich for planners to accept it when clients dont implement the cover they need due to cost, that means planners are taking commissions instead of allowing clients to spend that same money on more (needed) insurance. A once off fee can come from many sources, but ongoing premiums generally come from cash flow.
Joe, the whole point of fee for service is that the fee is for the professional advice to the client about what types of cover, what amounts and what structure, the fee is for the advice, whether they proceed or actually get the cover or not is not relevant to the fee being charged. The fee is for the time, knowledge, expertise, etc which go into the advice.
Certainly, all advisers should be completing significant pre-vetting of all leads and appointments. I run through most of the personal statement with a client at the first interview before even discussing types of cover and needs. That way I dont waste my time or theirs if they cannot be covered and/or I can pre-position likely loadings, exclusions, etc.
terry terry terry…time you and your mates below worked out the difference between commission and other negotiated and transparent charging methods. You’re still sending out bills while everyone else is working on smarter solutions.
I manage people’s wealth effectively….do you? That’s my main job and it has risks. What I’m getting at is that the anti-adviser brigade is now charging more like advisers do….what a turnaround. Have a look at the legal fraternity if you want an example of getting fat from fixed fees
Agree with fee for service strategy and investment advice – still not sure on insurance – general insurance still pretty much operates on commissions??? I guess fee for service for insurance will sharpen up your field underwriting skills and encourage a lot more per assessments… Would like to hear constructive comments re this, how do you deal with clean skin versus someone who does not disclose issues when asked? I am doing an insurance job add the moment and a few issues are coming out thanks to tele underwriting and pmar and I am pretty comfortable I did a pretty good job of per assessment….
Dave. Totally agree, we are flat fee and if the FPA bans commissions and percentages and conflicted issues, there won’t be a need for all this debate. Maybe then more intelligent debate and banter on the real issues.
I WORK FEE FOR SERVICE. Have for years. I’m amazed how this is still such a hot topic when it’s pretty obviously the way to go.
I HAVE 2 MORE THOUGHTS THOUGH…
1. True Fee for Service is via flat dollar fees. A % simply CANNOT be linked to time involved nor value added. There is no science behind it.
2. How many Fee for Service advocates also refrain from taking insurance commissions? I do. Just because you can doesnt mean you should.
Only planners who charge flat fees and no insurance commissions have truly embraced the fee for service philosphy.
My children can understand this, not sure why so many planners fail to…
A lot of hot air and negativity still over a basic concept. Fee for service is the only way to operate and has been for a long time, don’t argue or debate-just do it. it is sooo easy to implement unless you are a lazy sod. Real planners just get on with it and don’t worry about the rhetric, real service at a negotiated price. And YES-it is ok to pay/invoice monthly-good for client and certainly good for business. Commissions from investments are history. Fee for sevice implies service being given- not just offered- and -yes it does entitle client to get the deserved service and communicate as required without apprehension. So what sort of planner are you.
Gerry (04.03.13) meets any challenge to his commission pay structure with ridicule and counter claim.
Accountants quite correctly charge clients for services rendered (fee for service). Some clients prefer to pay as the service is provided, while others negotiate a monthly charge based on what work is performed in the year. They opt for whichever suits them.
Planners should embrace fee for service, because the commission gravy train is gone. And good riddance, as commissions skew advice to the benefit of the planner, not the client.
For far too long, poor planners have lapped up the up-front and trail, and soft dollar commissions, whilst providing minimum service. Good planners conducted regular client reviews, tweaked portfolios, and managed the client. Most of these are already on fee for service, some for each service, while others pay an annual negotiated fee.
What sort of planner are you Gerry?
…and isn’t it pathetic Philip that alot of accountants are now charging ongoing service fees by monthly direct debit, because it’s better for their cashflow and they won’t have to chase up fees. What’s the other resaon for accountants charging like that?…it means their clients can phone up and make enquiries without fear of being sent a bill. Of course, if the client doesn’t require any extra assistance throught the year they still pay the ongoing service fee.
Spot the difference?….no didn’t think so.
Isn’t it pathetic that the (usually big – ie banks and Life Companies)interests, and those of their employee advisers are put ahead of consumers’ and are allowed to drive policy?
ASIC needs to grow some testes and just say “no” to these leeches. If accountants can invoice each year for their services/advice, so can Financial Planners/ Advisers. I’ve been doing so for almost 22 years now and it’s just basic business competence. “Opt In” is a child-like solution for a childish, immature industry that constantly complains and runs to mummy for help while pretending it’s capable of giving others advice on how to plan their finances – Amazingly contradictory!
I reckon about 60% of advisers/planners wouldn’t get a job in the real world and when the commissions finally dry up they will too.