During the final week of the royal commission, ANZ CEO Shayne Elliott was grilled extensively about the mortgage broking industry. Counsel assisting Rowena Orr asked Mr Elliott repeatedly whether he believed broker remuneration needs to be reformed.
“No system is perfect,” Mr Elliott said. “A fixed-fee is also capable of being misused and also leading to unintended outcomes.”
When asked to verify if he meant the fee would be paid by the lender or the customer, Mr Elliott explained that fees paid by customers would create inequality.
“The difficulty with the fixed fee, if I may, is it, essentially, is of major advantage to people who can afford and have the financial position to undertake large mortgages,” the CEO said.
“It potentially is a burden to those who have small… So a subsidy would be being paid by those least able to afford it, and it runs the risk of making broking a privilege for the wealthy.”
Ms Orr suggested that the fee could be capitalised into the loan and asked Mr Elliott if this would address some of the concerns he had.
“Not really,” he replied. “We can move [the fee] further away, so it’s not immediately obvious to you, but somebody is paying for that customer.
“So, again, if it’s paid by the borrower, the incentive there will be that people seeking smaller loans, it would be uneconomic to go to a broker. So a broker becomes a service for the wealthy, much like financial planning has become.”
Mr Elliott’s comments come after Westpac CEO Brian Hartzer defended ongoing advice fees, telling the royal commission that he knows wealthy people who keep financial advisers on a retainer.
“I know people who pay for an advice relationship and are quite happy about the fact that it’s at their discretion to ring up the adviser and talk to them,” Mr Hartzer clarified.
Counsel assisting Michael Hodge said he was not being facetious when he asked if Mr Hartzer was talking about “very wealthy people”.
“Relatively speaking that would be true, yes,” the Westpac CEO said.
Mr Hodge suggested to Mr Hartzer that this was an important point, because the subset of clients that need to have an ongoing advice relationship and are in a position where they are “happy to just leave somebody to monitor their no doubt very significant investments” are going to be very wealthy clients.
“It depends on your definition. But I would say broadly, yes,” Mr Hartzer agreed.
I don’t agree with his comments saying that financial planning is for the wealthy at all. However when ASIC released it’s “fee for no advice paper” and the only way to evidence “service” is via a RoA…then yes when you take into account the amount of Red tap involved,… advice for all Australians died on the 27th of October 2016. R.I.P
Yes let’s capitalise our fixed fee of $10,000 to your home loan of $100,000. That way we’re not conflicted by commission.
Thanks to O’Dwyer, the FSC and our joke industry bodies financial planning is only going to be available to the VERY wealthy. There will be very few advisers left after FASEA and coupled with the LIF and other legislation the only way to get advice is going to be through high fees in the future. Only the wealthy will be able to afford them. The current system may not have been perfect but the totally un-thought out “fix” is going to be devastating for customers.
“The chief executive of a big four bank has admitted that financial advice has become a “service for the wealthy” since the introduction of fees for service.”
No sh!t Sherlock….%$&@!
You bank guys are seriously slowed up. Time you ALL left our industry to the real passionate advisers. Passionate about making a positive difference in the lives of our clients balances rather than in YOUR annual bonuses.
Sounds about right.. be prepared to pay more which will ultimately mean less people will get advice. Compounded with a mass exodus of planners there is a perfect storm brewing. I wish all the left wing do-gooders would actually pay a visit to the UK and take a few notes of how an industry was adversely affected.. the unintended consequences of your chest pumping reforms!
Really!! What is the expertise of these people such as Ms Orr? If a broker fee is capitalised into the loan it is then paid by the customer over the life of the loan with interest added. If a trail commission is included in the interest rate margin (as obviously is the ongoing cost of lending staff and branches where applicable) it is then paid by the customer over the life of the loan implicit in the repayments. Ms Orr will you please explain the difference? I wonder if you can!!!
It is abundantly obvious the ceo in question has NO idea of reality. Fee for service is very workable and affordable and has been the case for a long time AND clients see real tangible benefits. The statements presented are by a very ill informed person of zero substance. No wonder he failed as a ceo…no brains and certainly low intelligence is evident.
In 95% of cases I wouldn’t wish a ‘financial planner’ on my worst enemy let alone a family member. “Financial health checks” and othe snake oil sales tactics are just weaving webs of distrust. A tiny minority of the population could justify seeing one but the rest you can raffle off and put under the the car salesmen and real estate spruiker banner. You can’t be trusted with you multi thousand dollar soa fees and ridiculous service charges. Go away.
…and pray tell, what do you do for a living so we can trash your industry despite how noble it may in fact be….
Steven’s occupation is reading this site. I’ve missed him and had assumed he had gone on holiday but he is back.
Would seem you are right that he is back but tbh I thought his occupation was school kid. Oh, and the reason he’s back is he finally got his internet privileges back after his Mum took them away for smoking dope in the school bathrooms…
I’m looking forward to moving to a fee system where we charge by the hour. I can 100% guarantee that I will make more money, rather than answering questions and doing hours worth of research for free for clients where we receive little revenue from. Once I start that I can start charging a percentage based fee on successful insurance claims, JUST LIKE LAWYERS do. Oh, that’s right.. percentage based fees are bad. If you don’t wish a financial planner on your worst enemy why on earth are you spouting ill informed nonsense on a site for financial planners.
So facts please Steve.
Hah wow, been burnt much? Thankfully your opinion is just that, and a far cry from the lived experience of pretty much every decent planner’s client.
Today I saved $78k tax for the estate of a lovely lady who sadly won’t be with us much longer, she’s a new client and was overjoyed knowing her kids will be fine and the estate can be finalised simply.
Steven I suggest you give your personal mobile to all your family members and tell them to call you when they need help dealing with Centrelink rules, market volatility, tax and super changes, reviewing their insurance needs, planning for retirement, preparing wills and powers of attorney, helping kids purchase their first home, charitable giving and family succession planning. Tell them they can trust you to assist them with all these issues and keep up to date with all the changes because no one else can do it like you can.
Wow.
Of theses 95% of cases you have identified, if not with an Financial Planner, where do you suggest they get information to make an informed decision?
Of course it is. the rich are the only one’s who are motivated to increase their wealth, preserve, and pass on to the next generation.
ordinary Australians can and should access robo advice as it will be a lot cheaper for them. those on the lowest rung of the economic ladder should first get help from a life coach.
so the way forward is for the bottom end to either access life coaches, and or robo advisers until they can get sufficiently wealthy enough to afford a financial adviser.
advisers should change their business model based on the above.
government can make financial advice accessible for ordinary Australians by making it tax deductible.
the best thing i ever did was to partner with a life coach. a lot of clients who thought they needed financial advice first needed life advice, how to get out of bed on time early in the morning, how to go to bed on time, how to stop smoking, and lose weight, how to budget, what degree to do to increase their income so they could also one day dream of becoming financially independent
This actually makes sense.
Life coach.. that unlicensed, unqualified industry.. I don’t think so. Robo advice may well be appropriate for a lot of people but so would a financial counselor. Half of the life coaches also advertise is wealth or money coaches which would be personal advice and completely unregulated, for now.