PIFA president Daniel Brammall said the industry association had been unsuccessful in its bid to amend royal commission legislation around annual renewals and independence disclosures to include asset-based fees, despite “a great deal of interest from all sides of politics”.
“The interest came from the government, the opposition and the cross-bench, as well as from consumer groups like Choice and Super Consumer Australia,” Mr Brammall said.
“Senator Rex Patrick put forward an amendment to the government’s draft legislation insisting that asset fees be explicitly called out in the Corps Act definition of independence, section 923A. This would avoid consumers being misled.”
Mr Brammall said Senator Patrick’s amendment had been withdrawn at the time of the contentious bill’s passage through the Senate, following assurances from the government that the issue would be addressed at a later stage.
“Senator Hume acknowledged Senator Patrick’s amendment and gave him her undertaking in the Senate that they would be dealing with the issue,” Mr Brammall said.
“On that basis he withdrew the amendment and the bill was passed. In my subsequent meeting with Jane Hume’s office it was clear there is no such intention.”
Mr Brammall said commissioner Kenneth Hayne had specifically pointed to some forms of conflicted remuneration that were still allowed in the industry in his final report, suggesting these should be addressed in a later review of advice legislative settings by the government.
“Although FOFA banned some forms of conflicted remuneration including some ‘trail commissions’ Hayne noted that FOFA’s work in this area didn’t go far enough, and specifically called out the conflicted remuneration practices of the industry as “an attempt to replicate the revenue stream that flowed from a combination of upfront and trail commissions,” Mr Brammall said.
Consumer advocacy group Super Consumers Australia has also called for asset-based fees to be addressed in the government’s forthcoming quality of advice review, which will respond to the royal commission recommendation for further investigation into how regulation is affecting adviser processes.
“Disclosure of a conflict acknowledges the problem, but consumers would be better protected by removing the conflict altogether,” Super Consumers director Xavier O’Halloran said.
“This is why we strongly support the Hayne recommendation to review existing conflicts in financial advice by 2022. This review has to deal with the long standing conflicts in the financial advice sector, including asset-based fees.”
Dont understand this push to remove % based fees, and can only assume its another nefarious attack to destroy the industry, by people who don’t hate advisers per se but seem to run on the assumption that everyone that’s not ISA is therefore bank. I cant see the logical difference between an adviser charging % fees and the industry fund charging % based admin fees, in fact there’s is more conflicted as the underlying investment is the same across members and the tax and audit is a flat cost. Their justification for that would be partially the same as mine i.e. some of the costs may well be connected to FUM, also a % fee helps me to service clients that otherwise wouldn’t be profitable. It aligns outcomes for the clients and adviser. nothing will change anyway a client currently paying 1% on $500k can easily be switched to a flat fee of $5k + 5% indexation
The argument about the evils of % based fees has ALWAYS been a red herring. I could very easily argue the complete reverse and say they are much more aligned with the clients best interests and that hourly fees are totally nefarious. (Just go and see a suburban solicitor – jack of all trades and see what you are charged). It’s BS.
Who is the PIFA? Been around for over 25 years and never heard of them.
Profession of Independent Financial Advisers.
Used to be called IFAAA. It’s essentially a vehicle for trashing other advisers, in order to generate more business for Brammall and his cronies.
Brammall the unprofessional “professional” is a bit like Longstaff the unethical “ethicist”. Total hypocrites.
Dear Mr Brammall, given the world of any remuneration is conflicted, why should our Advice industry exclusively be banned from remuneration on a scale relative to size of funds managed ?
– Is your PI related to size of your AFSL turnover? Yep
– are fund managers you use paid on FUM? Yep
– are your business and personal taxes based on size of your income? Yep
– are your home rates based on value of your land? Yep
– what about Real estate Agents Commissions, what’s the annual size of sales and rental comms across Australia, massive amounts of evil size based remuneration! Yep
– Loan broker commissions on size loan? Yep
– Loan broker trail comms size of loan? Yep
– do architects charge on cost / size of project? Yep
The list of these conflicted size based remuneration or costs is soooo long.
Why should Financial Advice be excluded from such an accepted form of charging ?
I get you are wanting to be higher & mightier than the rest but the world accepts this form of billing, taxes, etc
But NO not for Advisers, naughty Advisers.
You forget the most important one…Do (ambulance chasing) lawyers get a higher fee when the award is higher….?
He just wants to remove competition with his underhanded Senate initiative because his advisers might well be doing badly financially and may not write insurance to speak of. He has never published any figures that show the size and quality of his association’s businesses.
My dentist charges me a fee. How dare he !
And he has a financial incentive to do extra fillings, cleaning, whitening, XRays etc even though you may not need them. It’s called conflicted remuneration. This applies regardless of whether he is paid by fee for service directly by you, or paid by your health insurance product.
Every profession is based on conflicted remuneration, which can only ever be managed. It cannot be avoided. It cannot magically disappear by mandating one form of payment method in preference to another.
All remuneration is conflicted, including fee for service. This is actually acknowledged in the Corps Act, by the fact there is a specific exemption for it from the conflicted remuneration provisions.
It is nonsensical to talk about “conflicted” vs “non conflicted” remuneration. There is “allowable” (eg fee for service) “restricted” ( eg insurance commissions) and “banned” (eg super commissions) remuneration. But all are conflicted.
Whilst the best thing for all of us is to work together to make this industry united, we have these other splinter groups white anting the rest of us to the consumer groups and government. This is why we are so weak. Run your little ifaa dealership, thats ok, charge how you want, but for gods sake lets stop throwing each other under the bus! Lets act like professionals, understand we are all different in how we operate, how we charge fees, what services we offer, thats fine, it takes many different people to make the world go around. We all want to help clients, that is where we are the same. Enough of the backstabbing , it does no one any good and just serves to divide us.
Comment of the year?