Why planners can’t ignore the latest industry super fund broadside
Financial planners must rebut the Industry Super Network's claim that asset-based fees are commissions by another name, writes Mike Taylor.
There is a certain amount of hypocrisy in the claims by industry superannuation funds that asset-based fee structures represent commission-based remuneration by another name.
The hypocrisy flows from the fact that most industry superannuation funds base their member expense ratios on the asset base of the fund.
Therefore, what is good for the industry fund goose is apparently not good enough for the financial planner gander.
After remaining comparatively quiet throughout the recent Federal Election campaign, the Industry Super Network’s David Whiteley has emerged in recent weeks to resume banging the anti-commission drum with the focus having been turned to asset-based fee structures.
It is probably no coincidence that Whiteley’s renewed efforts follow a declaration by the Industry Fund Services chairman, Garry Weaven, that after winning the commissions war he did not intend to allow the industry funds to “lose the peace” by maintaining commissions by another name.
Whiteley’s statements on asset-based fees are clearly designed to muddy the waters and, while clearly not wanting another “war”, the financial planning industry needs to ensure that the industry funds do not run away with the debate.
Thus, the statement by the Financial Planning Association (FPA) that asset-based fees are not “commission like” and are in fact “a transparent, fully-disclosed, client-negotiated, payment model that is paid by the client and not by the product”was timely.
In what represented one of his first forays into debating the issue with industry funds, FPA chief executive, Mark Rantall said that commissions and asset-based fees were two very different things and that it was misleading to confuse the two.
He claimed that under fee-for-service, which could include asset-based fees, ongoing fees could only be charged if a service was being provided and this was clearly spelt out in the agreement between the client and their adviser.
Rantall’s rebuttal of Whiteley and the industry super funds represents a good start but it is incumbent on the FPA and other bodies representing the planning industry to maintain this message.
If the planning industry wishes to stop the industry super funds winning Garry Weaven’s “peace” then it must clearly communicate the virtues of its new remuneration model and what it will ultimately deliver to consumers.
Irrespective of the validity of their message, the industry super funds have proved to be very effective communicators.
Financial planners lost the war on commissions. They cannot afford to lose the peace.
AUTHOR
Mike Taylor
Recommended for you
Join us for a special episode of Relative Return Unplugged as hosts Maja Garaca Djurdjevic and Keith Ford are joined by shadow financial services minister Luke Howarth to discuss the Coalition’s goals for financial advice.
In this special episode of Relative Return Unplugged, we are sharing a discussion between Momentum Media’s Steve Kuper, Major General (Ret’d) Marcus Thompson and AMP chief economist Shane Oliver on the latest economic data and what it means for Australia’s economy and national security.
In this episode of Relative Return Unplugged, co-hosts Maja Garaca Djurdjevic and Keith Ford break down some of the legislation that passed during the government’s last-minute guillotine motion, including the measures to restructure the Reserve Bank into a two-board system.
In this episode of Relative Return Unplugged, co-hosts Maja Garaca Djurdjevic and Keith Ford are joined by Money Management editor Laura Dew to dissect some of the submissions that industry stakeholders have made to the Senate’s Dixon Advisory inquiry.
