A Brisbane-based financial adviser has responded to a Synchron director’s recent comments around fee-for-service remuneration models, saying there is a lack of understanding of how fee-based advisers offer insurance advice.
Last week, Synchron director Don Trapnell said he believed risk advisers who charge a fee for service should not be considered more professional than those who operate under a commission model.
“For the life of me, I can't understand how charging a fee is viewed by some as a hallmark of professionalism and I can't understand the argument that receiving a commission translates to being less professional,” Mr Trapnell said.
However, Justin Brand, a financial adviser at Brand Financial, does not agree with those remarks, telling ifa they reflect a “sales-oriented culture”.
“The suggestion that commission-based advisers could be considered more professional than fee-based, because the client only pays for the service if they get insurance, simply underscores a sales-oriented culture in that part of the industry where commission is taken, and a lack of understanding of how fee-based advisers offer insurance advice,” he said.
“A sensible fee-based approach requires the adviser to collect a certain amount of information upfront, so they can ensure the client will get value from the service and fee paid. Commission-based advisers often describe scenarios and outcomes that don't exist in a fee-based model.”
Mr Brand agrees, however, that there are many instances where consumers with low insurance needs cannot afford fee-based advice.
“But to suggest that a commission-based adviser can do the job thoroughly and profitably is no more correct,” Mr Brand said.
“That argument points out a major problem that exists with commission advice: that often, there isn't enough commission from low premiums for proper and thorough advice to be given and that creates a strong incentive for advisers who are regularly dealing with small premiums to recommended more cover than clients need, to help pay for the service.”
Mr Brand added that commission-based advisers often take offence at the suggestion that they do not have their clients’ best interests at heart.
“To them I’d say, if a potential for conflict exists and it can be removed, why not take it off the table completely? Why leave that doubt in your clients' minds and ask them to trust that you are not influenced by the amount of commission paid, when you can simply avoid it in the first place?” he said.
“We can’t expect our industry to be treated as a profession and take conflicted remuneration of any sort.”
A new white paper has been released.
The investment manager has released its FY22 results.
The firm has released its results for the 2022 financial year.
Get the latest news! Subscribe to the ifa bulletin
Get notifications in real time and stay up to date with content that matters to you.