Adviser remuneration should be left to the client, says consultant
The way in which a financial adviser charges fees should be left for the client to decide, as the best interests duty already provides a layer of protection, argues an industry consultant.
Speaking to ifa, SMART Compliance founder Brett Walker said the industry gets “mightily distracted by the issue of how people get paid”.
His comments come after ifa reported recently that ASIC is seeking external legal advice to determine whether advisers who charge asset-based fees can be considered independent, as some believe there is potentially a conflict of interest.
Mr Walker, however, does not agree with ASIC’s concerns.
“There is an overlay of protection for the client in the form of best interests duty so, theoretically, the method of payment for personal advice will be secondary to the objective of client best interests in all cases anyway,” Mr Walker said.
“Asset value-based fees at least align an adviser’s interests to those of their clients. Advisers paid this way will tell you how challenging it was to operate post-GFC, but they suffered along with their clients. This is often forgotten.
“The market permits, and should continue to permit, any remuneration arrangement that the client expressly agrees to.”
AIOFP executive director Peter Johnston has also disagreed with ASIC’s concerns around asset-based fees.
In a recent email to members, Mr Johnston said, “The current noise around trying to include percentage based client charging into 923a [of the Corporations Act] as a conflicted arrangement defies common sense.”
“Trying to force our industry into hourly rate charging is not only repugnant, but flawed and conflicted. No one has offered a plausible argument that aligning your interests with clients who demand better than benchmark performance is conflicted,” he said.
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