Financial Services Council chief executive John Brogden has dismissed Industry Super Australia chief executive David Whiteley's conflation of asset-based fees with commissions as a 'furphy'.
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.
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