With the Trowbridge report due to be released this week, longstanding members of the risk advice community have voiced strong concerns about the possible introduction of a level commission regime.
Speaking to Risk Adviser, PEG Young & Associates owner Phil Young said in his submission to the LIAWG independent chairman John Trowbridge that if a level commission structure were to be introduced it would have significant negative consequences both for advisers and consumers.
“If it does become level, we’d lose a tremendous amount of advisers,” Mr Young said.
“I’d say 80 per cent of advisers would have to drop out and the person who is going to suffer in the long run – while the advisers will suffer – is the client [because] the advice is not going to be there.”
Echoing Mr Young’s comments, Harman Financial Services managing director James Harman told Risk Adviser that in his submission he said the introduction of a level commission structure will “devastate” the industry and many advisers will walk away.
“I just think that long-term, or even short-term, [level commissions are] non-sustainable,” Mr Harman said.
“A lot of the guys will drop out because it is not sustainable and everyone will just go to the banks and the banks do not have a great record when it comes to compliance."
Mr Young added that Mr Trowbridge is not taking into account the effect a 20 per cent level commission structure will have on the industry.
“He is supposed to be an actuary, but a simple man can sit down and come up with the [calculations] that an adviser will not survive on 20 per cent,” Mr Young said.
“If it went on 20 per cent commission – say the average guy is earning $150,000, so therefore on 20 per cent commission that would make it back to $30,000 – that wouldn’t even pay his dealership fees."
Both advisers also pointed out the “way to go” for a change in remuneration structure is by using a hybrid model through which advisers can be paid 60 to 70 per cent up front with a 25 per cent ongoing trail commission.
Mr Trowbridge is expected to release his much-anticipated report on Thursday.
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 13 Dec 2018AFA picks apart CPD policy from FASEABy Adrian Flores
- 12 Dec 2018FASEA confirms accreditation processBy James Mitchell
- 12 Dec 2018Aussie advice business partners with Bank of IrelandBy James Mitchell
- 12 Dec 2018Industry association aims to reverse 'crippling' LIFBy James Mitchell
- 11 Dec 2018ASIC cancels AFSL of Queensland groupBy Eliot Hastie
- 13 Dec 2018ASIC lengthens transition period for fee disclosuresBy Adrian Flores
- view all