Separate holistic advice from product advice
Advisers will need to separate personal advice and product advice fees in order to future-proof their businesses in the wake of the royal commission, according to DFS Portfolio Solutions.
In a statement, the company said bundling of advice and product fees has been an “unintended consequence” of previously implemented policy designed to curb “dysfunctional behaviour” relating to product sales.
“What is clear is that bundling planning advice and product advice is the source of the embedded conflict that has distorted the advice industry for so long; we all know this and so does the royal commission,” the statement said.
“Separating product fees from advice fees is the first step to addressing the underlying conflict. It imposes transparency upon the system, which is key to sustaining consumer best interests. It allows consumers to better understand what service they are receiving; and to confidently benchmark and compare their services (and costs) with other readily available options in the market.”
DFS said fee unbundling “may be forced upon advisers” and that this may happen within a shorter timeframe than expected, meaning advisers should look to separate their advice and product fees and benchmark both as a means of future-proofing.
“As advisers learn how to integrate and deliver these services, the industry will transition to an operating culture that accounts to consumers through an objective and measurable framework,” the statement added.
“Once the transition is made, advisers can go even further by offering risk-benchmarking services to achieve higher levels of accountability.”
Update: The headline of this story has been updated to reflect the fact that DFS Portfolio Solutions is advocating the separation of 'holistic' financial planning fees from product advice fees.
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