The Financial Planning Association (FPA) has hit back at calls for commissions to be axed, claiming such a move is out of touch with what consumers want.
The FPA said a report released yesterday by the Institute of Chartered Accountants in Australia (ICA) left out two-thirds of the remuneration debate and has come to its conclusions too late.
“The Institute of Chartered Accountants has moved into the financial planning space because it’s such a growth sector and it offers so many opportunities, but professionalism and professional financial planning is more than remuneration,” FPA chief executive Jo-Anne Bloch said.
“The FPA has well and truly dealt with remuneration through our conflicts of interest principles,” she said.
“For us it’s not about fees or commissions, it about transparency. It has to be clearly understood by the client.”
The dominant remuneration model that rely on funds under advice – the sale of products or the existence of assets on which to charge a fee – is a fundamental structural problem in the financial services industry, according to chartered accountant Robert Brown, the author of the ICA report.
“These models must cease, and [until] that occurs financial planning will not be treated as a profession due to irreconcilable conflicts of interest and the public interest will not be served,” he said.
Brown argues that the offending models must be replaced by fully disclosed advice-based fee models.
However, Bloch said research has shown that many consumers, if given a choice, choose to pay for advice through commissions.
“I’m not sure whether the ICA is in touch with what consumers really want,” Bloch said.
“To say commissions need to be stopped would be depriving thousands of people from getting advice and depriving thousands of people from earning a living.”
The Industry Super Funds Network has long argued that commission-based remuneration should be banned for compulsory superannuation payments.
It told a parliamentary inquiry into superannuation last year that disclosure is insufficient to deal with the problem because consumers do not understand what is being disclosed.
ICA said there was substantial disagreement about remuneration models among stakeholders who participated in a recent financial planning industry forum.
