FSI blasted for ignoring asset-based fees

A boutique practice principal has admonished the Murray Inquiry for not recommending a ban on asset or percentage-based fees, describing this remuneration model as "trail by another name".

Corin Jacka, managing director and founder of Corin Jacka Financial Solutions, said the FSI’s recommendations “did not go far enough to protect Australian investors” from conflicts created by asset-based fee structures.

“I still believe that as soon as an adviser – licensed through an institution – accepts commission of any sort or charges ‘asset-based fees’, an immediate conflict of interest is created,” he said.

Speaking to ifa, Mr Jacka said asset or percentage based fees were just “a trail by another name.”

He suggested these pricing models incentivise advisers to steer clients towards managed funds or products and away from other strategies like paying down a mortgage.

“The more that goes into that pot that the percentage is based on, the more income you're going to get,” he said.

He also questioned why advisers should get paid more for managing larger portfolios when little additional effort is involved.

“If I'm servicing a client that has $500,000 to invest and a client that has $1 million to invest, the work on me is not different,” he said.

“The strategies might err slightly but the amount of time and effort you put into it are not different.”

Mr Jacka said the FSI report should have supported banning percentage-based fees but nonetheless, the government would have been unlikely to support such action.

“It is just not in their interest,” he said

On the flipside, he praised the FSI for recommending a reduction in superannuation fees and a ban on upfront commissions on insurance products.

“Many fees and upfront commissions are currently too expensive and ordinary Australians are regularly unfairly penalised,” he said.

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