Hot topic of the week...

by |
Whether or not advisers should be receiving commissions is a hairy topic that always generates debate.

The article Commissions relate to ‘mischief making’: Sinodinos was no exception, with advisers divided as to what is the best option.

Assistant Treasurer Arthur Sinodinos said earlier this week the government wants to make sure a reintroduction of conflicted remuneration on general advice would not encourage trouble-makers in the industry.

The Financial Planners Association has said it does not agree with the introduction of commissions.

Rosemary Johnston looked at the issue broadly, but is worried clients are losing faith in the credibility of their advisers.

“Ensuring a healthy financial planning sector is vital. Would client usage rates and rates of adoption of the advice be a good starting point for measurement? What else do we need to measure?”

But Alleycat pointed out “clients are not stupid”, and said a scale of fees that is appropriate for the advice sought is needed.

“The one thing that distinguishes one adviser from another should be the quality of advice, the outcome that clients should come to expect.

“It's BS to say that fee for service removes conflicts, it's just as flawed and open to abuse just as much as commissions are.”

Innocent Observer thinks the issue is not black or white, and just because someone chooses to charge commissions does not mean they are a bad adviser.

“I charge fee-for-service not because I am better than the guy that charges commissions, but because that's the way I decided to run my business and price my advice…

“Continually focusing on the evils of commissions assumes that all clients are stupid and all (commission-taking) advisers are greedy. It's wrong and is not the way we should be presenting the lifelong profession of many exceptional advisers.”

Equating commissions with conflict is “rubbish”, said Keith L.

“Knowing fee for service was going to be inflicted upon us, for two years leading up to the inevitable I offered my client the ability to pay me utilising commission or a fee for my service identical to the amount of commission I would receive. Surprise, surprise - with only one exception, they all elected to pay using commission.”

But Pat disagreed with Keith L, accusing him of story-telling to defend commissions.

“What if the struggling individual's needs are not to be met by selling them a product? How do you get paid?”

Alleycat rushed back into the fray to Keith L’s defence, calling Pat’s view “pompous”, and saying:

“The test of what is fair and reasonable is judged by the client and not by you and not by me…It has nothing to do with how either one of us is paid. It's a shame if you can't discern the difference.”

As you can see, the debate is hot and furious – and Wealth Professional suspects it is not over yet.

Thanks to all our contributors this week. Read the story and more comments here.