In an FPA Virtual Congress session on Monday, around 400 attendees were polled around how they thought their clients felt about the way they were paid.
While 79 per cent of attendees said their clients would be “totally comfortable” with their remuneration, a further 20 per cent said they thought the clients would be “mostly comfortable”, and 1 per cent said the clients would be concerned.
Ethics Centre fellow Matthew Beard, who presented the session, said while the poll results were mostly pleasing, they did indicate some advisers could benefit from further critical thinking about how to present and structure their fees with clients.
“Warren Buffett’s become well known for his newspaper test – his test before he does something is to think about if a fair and balanced but well-informed journalist had a full understanding of this issue and they were publishing the front page tomorrow, would they be writing a positive or negative story?” Dr Beard said.
“That’s the approach that’s been taken [in the FASEA code] to the question of fees and payments. The clients must give free, prior and informed consent to all benefits being received – they need to be comfortable with the ways you’re going to make money.”
Dr Beard said it was important that fees were disclosed in plain English, and in a way that could not be questioned by a third party.
“Because this required fair and reasonable consent, this can’t be a procedural disclosure that’s difficult for a lay person to understand – you need to lay it out in a way they can make sense of,” he said.
“On top of this, it’s not just enough to get consent, you must be satisfied that any fees and charges are fair and reasonable and represent value for money. There are two tests here – the first is, is the client comfortable with this? The second is, are they reasonable that if the hood was thrown open on this and everyone could take a look, would it make sense?”
Dr Beard said that this raised the question of whether conflicted remuneration that was technically allowed, such as insurance commissions, was still questionable in an ethical sense under the code.
“The question becomes, with some fee types they might be protected by law, but are you upholding the spirit of the law? Even if you can do this because there’s some protection, should you be doing that?” he said.
“Are you providing value to the client and does that correspond with the fees you’re providing so that they’re left in a better state financially taking a holistic picture of these things?”
It’s probably fair to assume the “Ethicist” gets paid a PAYG salary by someone or some entity….correct ??? What would “Ethicists” position, view, opinion be if they were merely “Commissioned” to advise, teach, educate or write about matters of ethics? (i.e. no longer receive a weekly salary….only get paid for tangible output of value).
Basically same shite different day isn’t it.
Salary = get paid weekly regardless of whether you achieve anything
Commission = only get paid if you achieve the commercial outcome and then risk clawback for 2 years
So 99% of the surveyed advisers were comfortable with their own clients acceptance of their remuneration and only 1% suggested their clients may be concerned,however Dr. Matthew Beard then progresses this to comment that there still may be a problem with the payment of insurance commissions for example ????He is opposed to commission based remuneration because as an ethicist he is adamantly opposed to it, irrespective of whether the client has a choice to pay for advice via a fee or commission base for insurance and is fully informed.
The problem is the ethicists are conflicted in their thinking because they already have a biased position.
The problem is that they cant accept that is is equally as ethical to accept a commission payment as it is to accept a fee payment if the client is fully informed, it is reasonable and fair and represent value for money.
The problem also lies in the subjective assessment of value.
What may well represent value to one person, may not necessarily represent value to another even though the amount of the fee or commission may be generally deemed reasonable and fair for the volume of work completed.
However, the issue is that the ethicists are influencing the outcome by pushing a notion that it may well be unethical to
Dr Beard is reported as stating the results were ” mostly pleasing “.
How does 99% of respondents being comfortable with their client’s acceptance of their fees translate to only a
“mostly pleasing” response ?
The reason is because Dr. Beard has an agenda.
That agenda is based on an ideological rejection of commission based remuneration.
be paid a commission and therein lies their own conflict.
Those 1000 FPA members (who are being paid handsome intrafund salaries & bonuses) should be very concerned about how these ongoing intrafund fees are being deducted from fund members accounts WITHOUT the informed consent of those members and with no way for these members to opt out of those fees.
IFA’s are require to disclose fees in FSG’s, SOA’s, FDS’s, Opt-In renewal notices, client statements, ROA’s and ongoing service agreements. The fees are set out in dollar figures and the clients are required to sign off on the arrangements on a regular basis.
Industry funds are required to do zip, and they use financial advisers as a sneaky sales/retention strategy.
So before lecturing IFA’s on the ethics of our fees, maybe Beard could tackle the industry funds and the associated financial advisers who are paid by fees from members who receive no service. Once he is on record criticising that shameful conduct, then I might listen to what he has to say. Until then,any debate around value for money and informed consent is farcical.
One of the financial supporters of The Ethics Centre is media outlet, The New Daily.
If anyone doesn’t know, The New Daily is financially supported by Industry Super Funds.
Another supporter listed on The Ethics Centre site is the ABC.
You know, the completely balanced and unbiased taxpayer funded “our ABC “.
Is anyone starting to get the feeling The Ethics Centre has their own agenda driven and supported by an underlying ideology.?
And here we have The Ethics Centre up to their necks in FASEA designing and influencing the way in which Financial Advisers should be delivering financial advice and being remunerated .
This is becoming much clearer as things develop as to how this whole process has endede up exactly where it currently is.
We are being taken for a long and very destructive and dangerous ride by ideological ” ethicists ” who get a warm and fuzzy feeling when they feel they are in control of the free market and capitalist driven economy.
I immediately sense that Dr. Beard has a problem with the receipt of insurance commissions.
Anyone else have the same feeling ?
This is exactly why Standard 3 is an absolute abomination and simply cannot be safely adhered to on a day to day basis.
Standard 3 was re-worded to deliberately throw the receipt of variable remuneration types such as asset based fees and commissions into the scrap heap and enforce a transition to fixed fees and to eventually eliminate insurance commissions entirely.
It is not unlikely the regulator had input into the purpose of this particular Standard.
I ask everyone to research Dr. Matthew Beard and see what this bloke does day to day to get an understanding of why on earth is he being given air time about the righteousness of an adviser receiving a legally approved and accepted form of remuneration for providing personal financial advice.
It’s a joke that people like Dr. Beard is given any credence whatsoever when it comes to this space.
He needs to stick to writing the children’s books and debating whether it is polite or ethical not to let the person behind you have a go on the slide before you do.
Absolute bullshit and yet just one other ” expert ” in the field of ethics that needs to raise their profile by lecturing to advisers.
Well Dr Beard….let me ask you this.
If your wife was dying in hospital and had 1 week to live and the financial adviser delivered a Terminal Illness payment of $1,000,000 to the hospital bedside which would ensure financial security and well being for yourself and your children and allow financial pressure to be relived at a terrible and emotionally damaging time, would you ask that adviser if they had been ethical in receiving a commission payment at the time of implementing the insurance cover for your wife or would you reject the claim payment because it would have been more acceptable if the adviser had been paid via a fee rather than the commission ???
Another “expert” dictating how and how much I should get paid. Go to hell. Clients are told at every point what fees are and how much and on what the basis is. FSG, letters of engagement, SoA, annual statements, FDS, opt in, now annual agreements. The point is this: so long as the client is fully informed and agrees what business is it of all these know it alls to stick their over educated noses into the relationship. Just so sick and tired of the BS.
What would a fair and balanced journalist say about the MD of an ethics education company abusing his position on a government appointed board to force people to pay for hours and hours of repetitive ethics education, regardless of how much they have done in the past?
Clearly not talking about Intra Fund Advice Fees then.
I know, let’s come up with another place we can disclose our fees just in case the clients haven’t picked up on it in the 7 other places we currently need to disclose it each year.