Speaking before the commission this morning, executive general manager of private bank Marianne Perkovic was quizzed by counsel assisting the commission Michael Hodge about a Commonwealth Financial Planning client who entered a new business arrangement that wasn’t covered by grandfathering provisions.
An SOA given to the client included “a revenue sharing arrangement between the platform and CFPL that would enable up to 0.10 per cent of funds invested to be paid” as commission.
Ms Perkovic asked for additional time to read the SOA after being questioned by Mr Hodge, before confirming to him she was looking to see if the client in question had been a client prior to 1 July 2013 (meaning it would be permissible to continue accepting a commission).
“It doesn’t appear that they are a client that was pre 1 July 2013, does it?” Mr Hodge asked.
Ms Perkovic gave a curt “no” in response to the questioning.
“It appears that they are a new client after 1 July 2013,” Mr Hodge replied.
“…Correct”.
ifa’s rolling coverage of the royal commission financial advice hearings continues live today: https://www.ifa.com.au/strategy/25404-royal-commission-financial-advice-hearings-live-blog
Fee can be charged from the actual increase in the value of the asset as result of the good advice, and clawed back/refunded if losses are occurred. This would give advisors/banks incentives to provide good advice.
Totally agree and if we had IFA’s in the witness box – they too would struggle to answer the questions being asked – this RC is targeting the Banks because its a big fish – I know Planners on both sides and can assure you, I know all would struggle if they were put in the questioning box – so rather than ‘throw stones’ put yourself in their position and ask yourself how you could honestly answer the questions being asked and then how would the media interpret it and report
Wow yes, I bet there are lots, as in thousands of “ticking time bombs” out there. All these revelations could be the start of a lot of litigation.
I can hear the solicitors and lawyers rubbing their hands with glee right now, more than they normally do!
Solution: if you are anywhere near retirement, get out now while the going is good, if you can offload your business for any realistic price.
So, the collective seeking to dominate the finance industry at every level is being unmasked for the gang of thieves that they are. This lot have advisers. Not sure if they are selling product or are they providing advice. The proof is being unveiled. Despicable practices among the lot of them known collectively as the Financial Services Council.
On the other side are the virtuous lot claiming to “compare the pair” labelling the banks as wolves in the henhouse, whilst they themselves choose to not disclose and be transparent at all levels.
But how did they get away with this for so long? Well, you see they were lobbyists playing the game by getting greedy politicians to do their bidding and of course with the old nugget of self-interest abound between Banks, Life Offices the Industry Superannuation Funds and Politicians who simply want to get re-elected, they needed to find the scapegoat just in case things go wrong. That’s us.
But wait, we have our associations. The AFA, the FPA. Well that’s easy says the folks with the money. Banks life offices the ISN, just play to the self interest of those in charge at these “professional associations” also.
These associations, will throw us as its members under the bus and then we will be having our name and our business dragged through the muck.
Because, you see while playing this nonsense, the issue of best interest and FOFA and LIF will be our burden.
Of course, the consumer, well they don’t seem to matter.
The banks, life offices, industry super funds will win as will the politicians while those in charge of the AFA and FPA will move on and in their collective wake will be the adviser, the consumer and ultimately the economy.
This country and industry has been led by an incompetent bunch of nitwits at all levels. But who might I blame. Well I blame ourselves. After all, we had a choice at the Federal Election and we elected nitwits. At the AFA and FPA board, nitwits again.
The behaviour of banks life offices and industry super and vertical integration across all while asking us to comply with best interest for the consumer is a joke.
The way forward is simple. Break up the relationship between the product manufacturer and the adviser. Manufacturers need to compete for shelf space in an adviser’s office.
Remove AFSL’s as this merely adds to the cost and confusion to the consumer and adds a layer of cost for no real benefit.
Have an association that represents advisers and their activities and much like CPA’s conduct audits also.
Each adviser has a valued business and a contribution to make to their client. If this industry suffers a fallout as predicted of say 30% of practitioners, the consumer will be at the mercy of either greedy ISN’s or Life Offices or Banks and their sales staff (fake advisers) who would act for their parent entity despite best interest at law being the word amongst regulators and nitwit ministers in parliament. In other words, nothing will change, and the can will again be kicked down the road.
Jail a few bankers says Scott Morrison. Really? So now, having allowed these folks to ply their trade causing havoc, to appear tough, jail them. Where was this thought bubble when it mattered?
And what about the education imposed on all. Would that change behaviour? Unfortunately, not. After all some of the luminaries running around as heads of banks, the ISN or life offices, conspiring their evil in the boardrooms of Australia I am certain have qualifications also, but greed at any cost now means that they were practicing obtaining financial advantage by deception.
If we are serious about change in the industry for the better, then allowing current practitioners to have a restricted licence to advise on insurance matters with oversight from a compliance viewpoint ought to be better while those who want to continue beyond insurance to other matters of advice ought to upskill themselves as required.
To have an 8-unit bridging course when experience skill and knowledge is abounding everywhere and to have a one size fits all mentality is without merit, confusing and will deliver an outcome that will make the current issues worse. Much worse.
You should submit this to the commission
As you have stated the adviser is the Indian not the chief. Jail time for senior management is required. Anyhow, I have to write a letter to Santa, asking for a bicycle for Christmas.
If a client continues to place money into a grandfathered (entry and nil entry fee) product the adviser still gets paid the commission because it is from an old policy. If a super fund was established in 2010 and is still be used today for SG etc the entry fee and volume rebates that were paid from it pre-FOFA is still paid! How is that allowed to happen by the platform, the licensee AND the adviser!
Before you start throwing stones and tutt tutting at all this royal commission and fofa issues you better take a good hard look at your own business and client invoicing. There would not be a single financial planner in the country that is 100% squeaky clean. There would be a huge number of clients in your book that do not warrant any kind of fee for service and you all know it. Please don’t insult mine or the regulators intelligence and common sense by denying this fact. You know it, I know it and the whole industry knows it. So go ahead put on the whole “my clients need me rubbish” and justify why you are charging them a yearly or quarterly fee but know this. Without fail, a big law firm will come looking for you and your sneaky fee charging rort.
A good law firm with access to basic industry knowledge will litigate and win all day.
Be prepared to refund most of your mums and dads fees. They didn’t need to pay it and you know it. Hand holding is no longer an excuse sorry. It’s like a realestate agent charging you a yearly fee to give you market updates after buying a house. It’s not needed and unnecessary. Portfolio rebalancing, market updates, portfolio reviews etc etc can and should be done as needed and an hourly rate for your time charged. The savings to the client is huge as is The cost to the financial planner but that’s not their problem. STOP CHARGING FEE FOR SERVICE PEOPLE, it’s a rort and you know it.
Maybe bring back commissions only ,everyone will know what they are being charged , planners , advisers , product providers all disclosed upfront !!!!!
So how do you charge clients for monitoring investments and legislation specific to their situation, and alerting them when they need to take action in response? It takes time and resources to do this, even though the number and frequency of client contacts it raises cannot be predicted in advance. Clients are happy to pay for this, due to the piece of mind of knowing that someone is looking out for them and will get in touch when/if action is needed.
Your argument is akin to saying that security guards should only be paid when they stop a break in. The rest of the time they spend waiting and watching should be unpaid.
Please don’t insult security guards…
In the world of full disclosure the client agrees to a service for a fee. In which the adviser agrees to provide a certain service including taking on litigation and compensation risk.
If you have a problem with that you belong in the USSR. Just for the record you may have not heard but that system failed. Have your opinion but let the market decide what it will accept….inevitably the market knows a whole lot more than you.