Fee for service still an initial hurdle
A fee-for-service model can represent a hurdle to attracting new clients, according to a Sydney financial planner.
Nigel Stewart, chairman of financial planning firm Stewart Partners, said the “best practice” approach of charging fee for service can penalise firms that employ this model.
Stewart said this model “often penalises our firm when attracting new clients as they may believe our approach is more expensive than their current arrangements”.
“However, if we are able to do a full cost analysis [for prospective clients] – a task even we often find difficult to complete given the lack of transparency in financial services – we typically find our approach significantly reduces their investment costs.”
Stewart said his firm has charged a fee for service since 1998 to ensure transparency of investment costs for clients. In a submission to the current joint committee inquiry into financial services, Stewart said he believes the remuneration models “used by many advisers can drive behaviour that is inappropriate” and not in clients’ best interests.
He believes the current commission remuneration model has inherent conflicts of interest “that cannot be avoided or diminished to an extent” that the model “will ever be acceptable”.
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
