PJC hears case for asset-based fees ban

The SCC – which was initiated by consumer advocacy group Choice in 2012, and was helped to get off the ground by former Macquarie CEO Allan Moss and Vanguard CEO Jeremy Duffield – penned a submission to the parliamentary joint committee (PJC) inquiry into adviser standards, arguing that competency levels are too low and railing against a number of issues in the advice industry.

In particular, the submission criticised the asset-based fee model of adviser remuneration as well as alignment to product manufacturing.

“FOFA did not remove all forms of conflicted remuneration and new forms of conflicted remuneration have replaced older models,” the submission states.

“The dominant form of remuneration post-FOFA is asset-based fees or percentage fees.”

Percentage fees are problematic because they “obscure the cost of full advice” and also “incentivise advice towards assets from which a fee can be deducted”, the submission contends.

It adds that the proliferation of this fee model will “stand in the way of professionalism” for the advice industry.

In addition, the submission took aim at “alignments between advice and product makers”, which it says creates conflicts “inconsistent with advice given”.

The balanced scorecard approach adopted by some licensees and “very low platform licensing fees” are also forms of conflicted remuneration, it said.