Although the guide has some “laudable ambitions” some measures appear excessive, in particular the restrictions on how employees sell their employer’s financial products to retail investors, Tria managing director Andrew Baker wrote in the latest Trialogue update.
Employees can receive a salary, but can’t receive a bonus based primarily on sales success.
“How you are supposed to pursue a career in selling financial products – should that be your ambition – is unclear,” Baker said.
“Indeed, this career path appears to be effectively banned. ‘Go and sell real estate instead’ [which is not covered under RG246] seems to be the implicit message,” he said.
Elsewhere in the guide, Baker said the ban on volume-based shelf-space paid by fund managers to platform operators appears to have “tightened considerably” and is likely to drive vertical integration in the platform space.
Baker said the measures are “exceptional in a world where real estate and stockbroker commissions survive, and where payments from consumer goods manufacturers to supermarkets for physical shelf-space remain commonplace.”
The new guidance represents “another turn of the screw on the platform business model”, he added.
“As with much investor protection regulation we have seen in recent years, one of the side effects has been the creation of ever larger vertically-integrated competitors and reduced investor choice. RG246 looks little different,” he said.
I guess the big Q is – are you a financial planner assisting your clients to the best outcome, or are you a salesperson?
If a good salesperson then secondhand cars and real estate will provide a good living. At least in the car yard you know you are being sold to. The salesperson does not dress his action up as an adviser for cars.
Shocking article – no wonder we need regulating with this sort of attitude to the ‘profession’
Patrick, if you calculate as a % of the funds under management, then it is a commission. Calling it a fee is just a disguise.
http://www.cmpfinancialplanning.com.a...
A rose by any other name; what ever fee you charge it will equate to a percentage of FUM except now the client can turn it off when he leaves or changes adviser. Shelf space payments is important to licensee’s to run their operation and deliver services to their advisers Watch the big guys get bigger and independents go the way of the dodo). Commission is not a dirty word plenty of industries use it and the public is familiar with it. opt in would fix all of this without the need for the remainder of FOFA in my opinion.
Andrew, no it is not a commission. Commission is paid by the product provider and funded from “bundled” management fees charged by that product provider. That is, fund manager charges, for example, 1.8% per annum and pays the adviser 0.6% from that 1.8%. My fees are charged direct to the clients investment account separately from all product fees, my fees are clearly identified on client statements, my fees are clearly tabled in my SoA as a fee for service calculated as an annual % of the funds under management. My fees are expressed as including retention of my services on an “at call basis”.
I had to respond to Patrick’s comment “my fee for service is an annual % of funds under management”. This is really a commission disguised as a fee. It does not matter that it’s disclosed. It’s a conflict of interest.
This whole ASIC regime is from Keystone Cops – planners can’t advice on employer’s products and yet ISN’s escape virtually without having to produce any SoA at all or any of merit when they do – and yet they are all based around the ISN products. So hypocritical it would be hilarious if it weren’t so ridiculously biased.
I have already transitioned to fee for service. I implement my advice by arranging wholesale accounts for clients and my fee for service is an annual % of funds under management separately charged from fund manager fees but collected and remitted to me by the product provider. This is fully disclosed in the SoA and separately explained as a simple trouble free billing system. It is just like a direct debit, but to your investment/super account rather than to your credit card or transaction bank account.
Gerry spot on trying to shift clients to fee for service model is great in theory, but as the banks/product supplier well understand the money is the distribution channel. People are not used to paying for advice directly,
if you are IFA as we are the writing is on the wall,for many of us , luckly we are also accounting practice.
Sheesh. I hope this wasn’t a press release. How embarrassing. The views expressed by Mr Baker are atrocious and a huge part of the reason the industry is now suffering through the cost of implementing FOFA. Thanks for nothing.
Go to the top of the class Mr Baker, you are correct! The intention [i]is[/i] to ban people selling financial products. We operate in the financial [i]advice [/i] industry, not sales. Perhaps one day in the future there will be a place for product sales again, where an adviser provides strategic advice and the consumer then goes to the market place to speak with product salesman. But that time is not today. The industry needs to separate advice and sales completely.
jacquline, advice should be independent & why should client A Subsidise client B. I think we are missing the point. Its harsh if you want advice you pay for it, this why clients to value advice as for a long time it was seen to be given for free but in reality the clients pays for it via indirect fees, best to be upfront
Planners offer strategy, the products are only the tools to achieve outcomes for a strategy. And yes, we charge a flat fee for that service which is holistic. So, if this article is fact, scaled advise and narrow APL’s are only going to cause more issues to be solved in the future. The idea of independance has a lot to look forward to achieving.
the point is that vertically integrated businesses can cross subsidise their advice. This means that they are able to provide the same advice at a cheaper cost to the IFA. So no matter how much integrity and independence the IFA offers, they will always be at a disadvantage where part of the client solution is product.
Oh, selling products. That’s what it’s about? I thought the role of a financial planner was to do the right thing by their client? Selling products is what got the “profession” into this mess.
not sure what the problems is if you are one of 10% who arenot alligned, if you are fee for service whats the concern you should be rewarded for providing strategic advice not bonus/commissions etc. this is what is wrong with the industry, nice to see you are putting clients interest 1st, give appropraite advice and getting paid will not be issue. Simple concepts client accepts the advice you charge a fee for service” why should you get paid for using a platform. Product flogger or strategic advisor??