Fee-for-service doesn’t alter fundamentals
The transition to fee-for-service has not changed the fundamentals and has not had a dramatic effect on the cost of advice either, according to long-time AMP financial planner Roger Lescun.
Based in Albury, Lescun has been a planner for about 40 years. He said the transition was just another step in a constantly evolving industry, and that the last really significant change was the introduction of the computer. However, he said the main benefit of the transition process was that it made him better appreciate what it was he offered his clients.
“In examining the things we do and having to price them out, it really has enlightened me,” said Lescun. “You know what you do for clients but you also expect that they know what you do, and I think that hasn’t been true.”
Lescun agreed that his clients were more engaged because he was explaining the process of advice in a lot more detail. However, he felt that apart from that not too much had changed as the fundamentals remained the same.
“The client’s goals and objectives remain paramount in establishing what strategy is best for them and how we go about placing their investments in a portfolio that achieves those goals and objectives, in line with their risk profile,” he said.
Lescun said that the costs to the client were not that different either.
“Under the old system, in the way we operated, we would estimate the amount of work involved in working out a strategy for the client and establishing their risk profile, goals and objectives,” said Lescun. From there they would adjust the commission percentage to cover those costs, he said.
“From the clients’ point of view, there probably isn’t a great deal of difference in the actual cost to them of the process we go through now, and what was previously the process. The only exception is where there is a smaller amount of investment money. Because we are now more aware of our costs associated with the business we do for clients, there is a base cost to do anything for clients and that may be slightly more than it was under the old process.”
Lescun said while the transition caused him a lot more work in getting ready for the change, on reflection he felt it was a worthwhile process. But referring to the Government reform package, however, he felt that the regulators had a false impression of how the industry operated in general.
“I think there was probably a false impression by regulators that there was wholesale disregard for the regulation within the industry, and although the intention was to be more protective of the public, it was not required,” said Lescun, adding that in general the industry has been compliant.
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