Asset-based fees are not commissions, says FPA
The Financial Planning Association (FPA) has denounced the Industry Super Network’s stance that asset-based fees are commissions in disguise, questioning whether in fact cross-subsidisation of intra fund advice was a hidden commission.
FPA chief executive Mark Rantall stated that asset-based fees were not “commission like”, asserting that they were “in fact a transparent, fully disclosed, client negotiated, payment model that is paid by the client and not by the product”. His comments came after Industry Super Network’s chief executive, David Whiteley, said the financial advice industry was merely replacing sales commissions with “even more expensive” asset-based fees.
“It is concerning that there is an ongoing belief that commissions are the same as asset-based fees,” said Rantall, who explained that under a fee-for-service arrangement - which included asset based fees - ongoing fees could only be charged if a service was being provided.
“In a fee-for-service model, the client has the power to turn off the fee at any time and the fee is reviewed between the client and adviser on an ongoing basis,” he added.
Rantall asserted that under a fee-for-service arrangement, the annual ‘opt in’ requirement would become “redundant” and would be an administrative burden as a professional relationship between a client and their adviser required full transparency and disclosure of services and fees.
“If a question needs to be asked, perhaps it is whether cross-subsidisation of intra fund advice is in fact a hidden commission and should be subject to full disclosure,” Rantall asserted. “Disclosure and transparency must apply at all levels and with all participants in the financial services industry and not just financial planners.”
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