In a strongly-worded opinion piece published in Melbourne’s Herald Sun newspaper, Mr Kennett said that while “most financial planners [he knows] are honest operators” that the industry is plagued by conflicted remuneration models.
“No system is perfect and the investor must accept responsibility for how they invest,” he wrote. “But they are entitled to honest advice that does not place them at extraordinary risk. For that reason I cannot understand the latest changes to the Future of Financial Advice laws just passed by the federal government in the Senate.”
The chairman of mental health charity Beyondblue and former Hawthorn Football Club president called upon investors to be aware of the business models their advisers are operating under and to vote with their feet.
“Ask advisers if they are getting commissions or bonuses for the products they are offering you,” Mr Kennett instructed readers.
“If the answer is yes, find another adviser. All fees, charges and any commissions or bonuses relating to your investment should be disclosed to you. Many financial advisers have stopped taking commissions or bonuses. They charge a fee, which is fine, but commissions and bonuses should be banned.”
He also suggested raising minimum adviser education standards and bringing the ‘Series 7 Exam’ – a qualification administered by the US Financial Industry Regulatory Authority (FINRA) – to Australia.
I’m confused. Is it his work in advertising, politics, football or charity that qualifies him to comment on this? Certainly, with that background, he should know all there is to know about conflicts of interest!!
Jeff has been suffering from relevance deprivation syndrome since the people of Victoria unexpectedly booted him out of office (unexpected by him that is).
I don’t blame Jeff for sticking his nose in on subjects where he has no knowledge – he has been doing that for years. But surely the media should stop giving him the oxygen it does.
A Current Affair can only demonstrate some of the industry injustices, to a degree but it stops short of exposing anything that may hurt their corporate advertising underwriters. Respectfully, Jeff Kennett should champion the cause for a royal commission into wrongdoers in the industry. The Commonwealth Bank is not the only bank, I am aware of another (a repeat offender)! They are also involved with the largest advisers in the land. NOTE: Jeff Kennett warning citizens to avoid financial advisers that charge product commissions is a nonsense. To make such a statement is wrong, there are many more honest advisers than the rogues. There needs to be a regulating body that is proactive across the board. We need to work together for the good of others particularly the elderly now left defenceless.
Also when I get divorced next time I want my lawyer to guarantee he/she will work toward a beneficial and happy outcome for me as quickly and efficiently as possible.
I would be disgusted and horrified to think that he/she may have any interest in taking longer by inflaming the situation and turning the situation ugly. Heaven forbid after all they are remunerated on the only moral method there is….the ‘hourly rate’ and ‘fee for service’ model. A fee that is worked out and disclosed after the fact. Where did I go wrong….’forehead slap’!!
That’s right Ian Byrne.
Let’s call the lucrative ex-politician’s pension scheme and associated financial lurks as a guaranteed lifetime trail commission that was based around the provision of service whilst they were representing their electorates (ie clients)and continues to be paid year in year out long after any service has been rendered to the people that voted for them. It’s like an adviser retiring and continuing to receive their adviser service fees or trails forever.
There is just so much hypocrisy in Kennett’s comments it’s laughable……but no different to Pavel.
Why is everybody telling planners how they should get paid? Reality is that flexibility needs to be incorporated into the system, sure we can charge like lawyers – fee for service – no skin in the game, outcome becomes immaterial.(From numerous discussions with clients I would say that 5% or less have had a positive experience with their lawyer). Full fee for service, Hell yea – that’s the way to go, $20.00 for email, $50.00 for letter, $15.00 per phone call – in 5 minute intervals, review a file $150.00, change asset allocation $300.00, SOA for existing client $1,200.00 (simple case) and for a new simple case SOA $2,000.00.
If fee for service only is the model this ex-pollie is endorsing then action speaks louder than words; why not also endorse a termination to all the pensions these ex-politician blood suckers at both state and federal level syphon out of the system for services they rendered in the distant past? Isn’t that exactly the same as an adviser receiving commissions on an ongoing basis?
And we should make it compulsory for Doctors to disclose when they get financial support from suppliers to attend “conferences”.
Coles should disclose the mark up on milk
and more idiocy.
I am a consumer and I don’t give a rats if my adviser gets a commission as long as it is disclosed. I am more interested in if he gets any other support from his AFSL.
AJD – Brilliant !!!!! Best thing I have read all week !
I would not want to use a Doctor that is recommending products or services based on his rebate or commission. Perhaps.some risk advisers feel ok with this I don’t.
I’m waiting for the day when Dr’s, Dentist, attached pharmacist’s in super clinics have to disclose the bonuses and exorbitant sign on fees they get based on patient through put and referral to related diagnostic and pathology services. Every peice of gross income I take in is disclosed and agreed to by a client before proceeding. I’m tempted to ask my Doctor, Dentist and pharmacist what his gross income is and what he gleans from me, the taxpayer and their employer next time I attend based on what services I use and many I get but don’t really need. About time attention seeking, relevance deprived has beens and their sycophantic cheer squad get another more meaningful hobby as this is getting boring.
Kudos to you Jeff..as usual you have called it as you see it and the comments in response largely reflect you are spot on and have hit the raw (hip pocket) nerve of advisers still anchored to an indefensible and archaic compensation model.
Only wish you were in Canberra making real and positive change rather than the current ineffective mob.
Rob, that is not a fair comment, there are a few advisers who do that but most dont. That said if a client saw me 5 years later and they can have the same cover with company x and save 20% in premium is the client going to be better off?
Jeff Kennett should be aware that the Financial Planners involved with Storm Financial were charging fee for service.
At end of the day, when the product makers own the product advisers, we are still going to face some very fundamental problems. Any financial link at all compromises the perception of integrity in financial planning advice.
As long as advisers try and justify life insurance commission as “covering costs” they have very little credibility. There is a reason why people with an adviser relationship tend to change insurance every 3 years………
Kennett should demand the same from doctors and chemists. Ask them to disclose the benefits and income or margins received when prescribing various drugs or making referrals.
Jeff should stick to his work for BeyondBlue and not become a Malcolm Fraser MK2.
I don’t want to pay my real estate agent 2% commission for selling my house (circa $16,000). After reading Jeff’s comments I want to pay him a one off service fee of $2,000.
Thanks Jeff, you saved me a bundle.
Personally I’d like to see Good commission free risk products developed. Advisers can choose how they charge but they would need to show the client why a commission product is better than a nil commission product. If organizations rely on the sale of commission products to survive they will always be conflicted. A dealer group should be paid by Representatives based on the value they add and the services they provide, let’s get rid of Volume bonus’s and and kick backs from Wrap providers and clean our industry up.
This article tells us exactly how much Mr. Kennett does not know about financial advice. Asking product providers not to offer a margin to advisers or for advisers not to accept a commission is just stupid and not commercially viable! It’s like asking a restaurant to charge the food at their buy price and charge you a fee for serving the food? Yeah.. I can really see that working.
I suggest that this pollie stick to what little he knows and stay out of the community’ financial affairs.
Unfortunately this is news and unfortunately Jeff clearly has a lack of understanding of what he is talking about.
When was there an absence or lack of disclosure in this industry ??????
As so often happens high profile people not involved in the financial services industry make sweeping generalized comments about advisers they know nothing about.
Many advisers who are involved in our industry and who focus on risk products work on a commission base the alternative to charge a fee would in the majority of cases end with the client not proceeding with the cover required or possible going to one of the direct providers. Whereupon they will receive no ongoing service , no real advice, no assistance with claims, no product comparisons and quite often end up with a product which doesn’t meet their real needs.
Jeff Kennett (who Generally I respect)should be extremely careful before giving advice which could stop people proceeding with cover they really need.
Jesus who does JK think he is?
He was one of the best pollies money could buy.He is only a few years behind the 8 ball. Not bad for him……
Jeff Kennett is nothing more than an expert publicity hound. Jeff Kennett markets Jeff Kennett better than any agent could ever dream of.He is a social commentator, media commentator, business commentator and a deliberate provocateur, and well knows that controversy sells the Jeff Kennett brand, irrespective of whether the content of what he says is ill informed and inaccurate.The louder Jeff sings, the greater the “noise”.
Everyone knows the definition of an “expert”…..”an ex is a has been and a spurt is a drip under pressure”
Anne, Pfffff#2 ask your friendly CFMEU/Union funds/ISFA/Cbus shonk how many contractors, workers etc they let onto a Union dominated sight if you don’t contribute every last cent of super entitlements to Cbus. Big fat Zero! At least the banks and life companies don’t prevent you from working and earning a living to get money into their coffers. Also I cant believe the FPA are singing up with these rouges. Jeff Kennett is not across the issue but cant help himself given he thinks he is the greatest expert on everything.
Anne, Pffffff. Ever had Qsuper, Cbus or any other industry fund offer any other product but their’s. How many “independents” run their own seperately managed accounts and direct client funds their.
Commissions are banned, if hot air makes a balloon go up I wonder whats keeping Jeff on the ground.
investment product commissions are banned, but of course risk commissions are not. It is the elephant in the room and many a dealer group is still 100% reliant on commissions for profits.
All talk again Jeff! DO SOMETHING! The people are hurting, the structure needs repair no one is listening.
You have to love Jeff Kennett; he is an expert on everything. What were Victorians thinking when they booted him from office?
Obviously Jeff has no idea what he’s talking about because commissions from investment products have been done away with for over 12 months now. I wonder how many commissions, kickbacks and under-the-table benefits Kennet received whilst president of Hawthorne Football Club. Ooops we won’t talk about that one because it doesn’t suit me..
I just wish politicians were better informed before they make public comment. Series 7 exam is for stockbrokers not financial planners. Commissions on insurance help subsidise advice costs – either the client pays it or the product provider pays it. We are hardly going to recommend more insurance than they need to make more money. What is it about these FOFA reforms that can place the client at extraordinary risk? As long as we put the client first, just leave us alone.
Do politicians even understand that commissions are now banned?
Jeff Kennett’s advice on questions to ask your advisor before giving them a cent of your money is the only way investors can really counter the greedy might of the banks. Ask your advisor questions about whether he or she gets commissions/payments/bonuses/has to hit product sale targets and whose products they are selling, and if they are aligned to any bank or life office, wait for the answer and hot foot it out of that office if any of those answers acknowledge the tie. Go to an independent advisor. If enough people do this the banks will eventually have to redraft their greedy money making model away from churning investors and regarding them as recipients for their products.
I know…let’s ban profits as well. Let’s ban company director bonuses too and short term incentives. Let’s make the whole world operate on a fee for service. Please don’t bring the Kennett curse to financial advisers.