Mr Brogden and Mr Whiteley joined Financial Planning Association CEO Mark Rantall in a heated panel discussion at the ISA-hosted Financial Advice in Super Symposium in Melbourne on Friday.
Responding to a question from the audience about the failure of the financial advice industry to self-regulate in the lead-up to the FOFA reforms, Mr Brogden conceded that commissions “needed to go”.
“We saw that train coming. Tragically, commissions had been abused – there’s no doubt about that. They needed to go, and they’re gone,” he said.
With tongue firmly in cheek, Mr Whiteley interjected: “Apart from insurance, apart from volume rebates, apart from ongoing asset-based fees [that act like] commissions – they’ve completely gone. They don’t exist. No conflicts of interest – nothing to see here,” he said.
When asked by Mr Brogden to explain what was wrong with asset-based fees, Mr Whiteley said they are “exactly the same as a commission … it’s called something different, [but] the whole community knows it’s exactly the same”.
In response to Mr Whiteley’s demand to know the difference between an asset-based fee and a commission, Mr Brogden said:
“The legislation provides that you’ve got to identify what the cost is both in dollars and in terms of the percentage.
“And here’s the difference: they go up and down if your assets go down – and a lot of people’s assets went down in recent times. It’s a furphy to suggest that commissions continue with asset-based fees – they don’t,” said Mr Brogden.
For his part, Mr Rantall said the FPA’s major concern was the creation of a loophole under the general advice and ‘execution only’ section of the recently-announced FOFA amendments that could see a return of commissions.
“Don’t get me wrong – I’m okay with general advice. If you want to build a bonus structure to help create more general advice for Australians, and the institutions feel hamstrung by the current system, I’m okay with that,” he said.
“But if it means bringing back commissions and it provides a loophole that will be applicable to everybody … [via] execution and general advice, that’s the one we should be debating,” said Mr Rantall.
[quote name=”Old Risky”]Excuse me, have I missed something
Didn’t Mr Brogden & Mr Whitely announce a cosy rapproachment just before Xmas.
Whitely needed as many friends as he could get post the Election, but apparently he is still rattling on with the same old idealogocal diatribe
And judging by some reports in this weeks media, he is busily briefing every journalist he knows about the evils of the changes to FOFA. Even Crikey gets into the act.[/quote]
which underlines the fact that the ISN were never really serious about working collaboratively in the first place, what a surprise. Without new management, the ‘rapprochement’ you mention will only last until Labor are eventually returned to power. I think I’ll pass, at least until the Royal Commission into union corruption is resolved.
Excuse me, have I missed something
Didn’t Mr Brogden & Mr Whitely announce a cosy rapproachment just before Xmas.
Whitely needed as many friends as he could get post the Election, but apparently he is still rattling on with the same old idealogocal diatribe
And judging by some reports in this weeks media, he is busily briefing every journalist he knows about the evils of the changes to FOFA. Even Crikey gets into the act.
It’s good to see Mr Whitely and few of his ideological sycophants (including the Labor Party) continue to argue that they know what is best for everyone and how they should be remunerated!
Regardless of business models, at the end of the day it should be up to the client how they want to pay for a financial advisers’ services.
Many clients can’t afford upfront fees so choose to enter into an asset-based fee arrangement. There are arguments for and against these types of fees, but if they are properly disclosed and the client agrees to them – what is the problem?
Once again we have a minority of indutry-fund aligned stakeholders who think they know better than the average client and want to save them from themselves.
My reponse to that is, look in your own back-yard first and when you have removed all conflicted rem from your sector (e.g. group insurance kick-backs & asset-based MER’s) before you start inflicting your personal views on the wider population.
Les & Steve, I am aware of accountants who charge in different ways. Such as hourly rates, set fees and value based fees. I have also seen clients that pay anything from $800 to more than $5,000 pa for a simple SMSF. In some cases the tax advice is all outsourced to cheap foreign sweatshops and the Australian accountant merely adds their logo and a huge mark up, without telling the client their personal information was shipped off to a 3rd world country. I have also seen a great number of accountants who flogged so-called ‘tax effective’ projects to clients for high commissions, which no regard for diversification, and as a result clients were left with nothing but huge debts. Want a SMSF? No worries, no Statement of Advice, no regard for insurance, investment or Centrelink implications, no statutory compensation mechanism and no Financial Ombudsman Service if things go wrong. Is this the standard to which you think Financial Planners should aspire?
@Brad Skinner….Fees have to be disclosed and agreed upon between client and adviser upfront for agreed services regardless of how they are calculated or charged. Why should it be up to anyone else separate to that dealing to determine or dictate how or how much someone is willing to pay for a service. The inference is that there is no obligation to provide a service. This is just plain wrong and misconstrues what is required.
I just laugh at the Accountants comparison who mostly charge by 6 minute increments and are rewarded for inefficiency..Check!!.. The longer they take the bigger the bill..Check!!..A serious conflict that many Accountants don’t even understand let alone address.Check!!.. Accountants draw up the bill after the service is provided..Check!!.. Accountants permitted to deduct their fees from client refunds before the client gets it.Check!!.. Can you spot the hypocrisy. Check!
How any professional is paid lies with the people involved. If asset based is acceptable-let it be so. The whole commission argument has been buried. Just like accountants or solicitors-( and don’t believe some of these do not charge based on asset size), the client agrees to the charges and the service. I prefer fixed fee for service but business is business and so far we live in a free country. So, Mr ISN, pack your sorbent and ride off to a controlled country.
This relentless obsession to eliminate all possible conflicts of interest is an impossible task in [u]any[/u] industry or profession. And the stark, black or white ‘choice’ that we apparently all need to make, between ‘professional adviser’ and ‘product salesman’, is a simplistic and immature argument, especially in a post-FOFA environment where the vast majority of consumer protections are in place and not up for review.
When will we finally move past this self-destructive ‘I’m better than the next guy’ posturing?
Our clients will ultimately decide who has integrity and who offers better value, the rest is just pointless conversation from self-serving players with very obvious vested interests.
Entrenched views such as those expressed by David Whiteley or the gentlemen who have commented before me will not be changed as they are either ideological or partial based on one’s own business model. The reality is professionalism has nothing to do with how one is paid and has everything to do with transparency and service. Dont forget that most people still ‘have’ to see an accountant as they are required to submit a tax return. People ‘need’ to see a Dr as they are sick. There is no need for people to seek financial planning advice and yet it is obviously in the public interest to ensure that people plan for retirement and seek protection from insurable events. Its a macro issue which requires a range of solutions including different business models which suit the broad spectrum of clients and advisers – this includes the ability to fund advice payments via appropriately recommended products.
Just about all my clients are asset based remuneration…and you know what, they like it because they know its in my interests to pay attention to their money ongoing. That’s what they say, I didn’t make that up.
I’m sick of this nonsense too. Sick of people assuming asset based fees equate to lack of service. Sick of people thinking we have to sell something to get paid….very stupid and false argument.
The debate should be broader than this – if Whiteley wants asset based fees dropped by Financial Planners then product providers should do likewise. I don’t support asset based fees for financial planners but I’m sick of financial planners being singled out and David Whiteley’s Industry Super Funds continue to receive commissions from insurers and charge asset based fees in one form or another. It’s about time he opened the books so we can have a good look at where they get their revenue from and whether it complies with the standards he wants applied to financial planners.
Steven, Accountants do charge asset based fees and have so for many years. They charge a % of assets to take people to an IPO, to sell a business , to acquire a business. That’s not the issue. If an adviser gets marked by whether their clients assets perform or not and if PI insurance is charged based on the assets you are managing on behalf of clients and if compensation is based on assets of clients,tell me why its not appropriate to charge asset based fees. The argument keeps changing. First they were conflicted because you had to invest a clients money to get paid. Now they are like commissions because why? The fee agreed with and paid for by the client is based on the assets invested. We are flat fee but the argument for no asset based fees not does not wash.
I dont know why they would agree to have a discussion with the ISA morons. It strikes me as funny when Mr Whiteley talks of asset based fees as being commissions, as the ISA charge asset based fees. Mr Whiteley should look in his own back yard. With the well publicized fraud within the Health services union and associated Industry super fund where there were kickbacks paid to union officials on the board of the Industry super fund, for insurance policies forced on the ambulance drivers. It was like listening to Labor claim to be caring for the working man. Lets see what comes from these royal commissions into the unions/Labor/ISA. Whitely has a hide as thick as a rhinoceros though and so will not concede any hypocrisy.
[quote name=”Steven Skinner”]Sick of hearing about all this nonesense!
If the Financial Planning seeks to become a profession then it MUST remove all situations that might lead to a perceived “conflict of interest”. Fundamentally, Fee-for-service implies that someone provides a services and charges a fee. “Asset-based Fees” are charges regardless of a service being provided. Can you image an accountant charging a client a “percentage of net assets” to prepare a tax return?
Either become a profession or keep “selling products” … its your choice. Please stop trying to “fool” the community… its a simple decision![/quote]
You’ve got my vote Steven, perhaps the debate about Financial Planner versus Financial Adviser should be Financial Planner versus Product Salesman!
Sick of hearing about all this nonesense!
If the Financial Planning seeks to become a profession then it MUST remove all situations that might lead to a perceived “conflict of interest”. Fundamentally, Fee-for-service implies that someone provides a services and charges a fee. “Asset-based Fees” are charges regardless of a service being provided. Can you image an accountant charging a client a “percentage of net assets” to prepare a tax return?
Either become a profession or keep “selling products” … its your choice. Please stop trying to “fool” the community… its a simple decision!