Ban commissions, says adviser
Prominent financial adviser Anthony Starkins has called for the outlawing of commissions because they contravene the fiduciary relationship between advisers and clients.
Prominent financial adviser Anthony Starkins has called for the outlawing of commissions because they contravene the fiduciary relationship between advisers and clients.
The First Samuel managing director made the startling statement in a submission to the Senate Select Committee on Superannuation and Financial Services.
Starkins claims the fiduciary duty imposed on advisers means their chief responsibility is to act solely in the best interests of clients. As such, either receiving commissions or being rewarded with other benefits contradicts what the duty is about.
“Until such practices are banned and appropriate legislation recognises the existence of a fiduciary relationship, investors cannot be confident of receiving independent and impartial investment advice,” Starkins says.
The relationship between advisers and clients is also unequal, according to Starkins, since advisers are industry professionals while investors have little or no knowledge, which is why they are seeking assistance.
“Informed consent implies a relationship between equals which, with unsophisticated investors, rarely exists,” Starkins says.
“Any benefit that might influence a planners advice, whether disclosed or not, should be made illegal.”
According to Starkins the industry has a vested interest in the issue but if it fails to move to outlaw commissions, Parliament will seek to protect retail investors through law.
He says lack of action on this issue would leave the industry with unlawful and immoral practices which were disadvantageous for investors.
Starkins was also critical of the efforts of financial institutions in gearing employee remuneration on products depending on whether those products are in-house or externally provided. He says there are also cases where products from competitors are excluded, even if they are superior and best suit the needs of clients.
Starkins says these practices are not well known but represent the most unethical of all commission type practices and all that was wrong with retail financial services.
AUTHOR
Jason Spits
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