Fees not top of mind for financial planning clients
Retail clients do not give too much thought to the remuneration model their financial planner operates on, but fee for service provides transparency and value, according to AMP financial planning head Steve Helmich.
His comments came after AMP announced Helmich would address US planners at the Financial Planning Association conference in California later this week, where he will take part in a discussion panel called "Life Without Commission - Life Without Conflict?".
While the commission-based model has been banned in the United Kingdom, Australia (from 1 July 2012), India, Netherlands and other countries, this is not the case with the financial planning industry in the United States and Canada.
Helmich said he would outline most important factors in transitioning financial planning practices to the fee for service remuneration model.
Many US planners do operate on a fee-for-service remuneration model, but most are still entrenched in the old commission world, Helmich said.
"For those who are in the commission world, the advice I'd give them is that clients actually don't care; however, where there is transparency there is value, and the fee-based world is a lot better in that space," he added.
"This is important for any potential client - probably not the client you're dealing with now, but it's the client you might want to attract or deal with in the future," Helmich said.
However, Helmich will not argue that the removal of commissions would rid financial planning practices of all conflicts - transparency being the future of financial planning.
"You can't have a world without conflict; we've got to manage them properly and make sure consumers really understand what they're getting for what they pay," he said.
AMP was one of the first financial planning institutions in Australia to completely ban the commissions-based remuneration model for its planners, having introduced fee-for-service on 1 July, 2010.
He will take part in the discussion panel on Friday 15 September, alongside UK certified financial planner Robert Reid.
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