Commission planners compromised

A respected Victorian financial planner has drawn comparisons between drink driving and the commission payments paid to financial planners, saying commissions should be banned to protect the majority from the dangerous minority.

Financial planners are making their voices heard in the parliamentary inquiry into financial products and services being chaired by Bernie Rippoll. Collins House Financial Services managing director and financial planner Dominic Alafaci has joined other respondents to the inquiry in making a call for the different models of financial planning to be more easily distinguished from each other in the eyes of consumers.

Alafaci, the winner of Money Management’s Financial Planner of the Year Award in 2000, believes there should be changes to the way financial planners can label their services depending on their method of remuneration. Alafaci said he would like to see the “Federal Government support those professional financial planners who agree to work on a non-commission, fee basis by legislating that they be allowed to be called independent financial planners/advisers/brokers”.

Alafaci suggested that commission-based participants “only be described as financial product agents”. Those planners who receive commissions from more than one manufacturer could be described as multi-agents, he suggested.

Many financial planners will argue that they can receive commission payments while also putting clients’ interests first. But in his submission to the Rippoll inquiry, Alafaci said “not everybody has the discipline to put the clients’ interests first when the temptation of high commissions still exists”.

Alafaci said he is “sick of seeing clients who have lost hundreds of thousands of dollars [because of] the actions of the minority of commission-hungry accountants, bank advisers, financial planners and stockbrokers who are ‘anesthetised’ by commission”.

He believes these people are more likely to gear “clients to the hilt in high commission products, especially if the clients don’t have much to invest”.

Alafaci argued that society often imposes rules to manage dangerous minorities for the benefit of the majority. He believes the same should occur in regards to commissions.

“Like most other professional advisers, I was ‘brought up’ on the commission system in the 1980s,” Alafaci said.

But he now believes that “as ‘we’ can’t be trusted with commissions, we have to ban them”.

In his submission, Alafaci has called for all members of the Financial Planning Association to support the association’s move to phase out commission payments by 2012.