The Institute of Chartered Accountants (ICA) has called for financial planners to move to a fee-for-service model, stating that commission payments inherently result in conflicts of interest.
Manager of financial planning and superannuation Hugh Elvy said: “It appears that Westpoint is an example of how the conflict of interest between the needs of the client and the self-interest of the advice can impact on the financial planning process and therefore the investing public.”
According to Elvy, fee-for-service arrangements are more transparent and give investors greater confidence in the independence of their adviser.
Elvy said: “Whilst disclosure of fees and commissions is imperative, it is just as imperative to ensure the client understands that there is no incentive for planners and advisers to favour one investment product over another.”
He added: “The fact that there can be variations in commissions will inherently cause a conflict of interest, irrespective of capping and disclosure.”
Currently, all ICA members offering financial planning services operate on a fee-for-service model, in the same way that accounting services are fee based.
However, ’Association of Financial Advisers (AFA) chair Michael Murphy believes that many accounting bodies are entering the debate on fees versus commission in order to drive their own business.
He said: “I think it would be fair to say that now you have a huge number of accounting practices moving into financial services, and their model has always been fee-for-service.
“They have got their own press machine the accountants, and they are saying you have to find someone who is fee-for-service, but that is just the model they have always used.”
The AFA has opposed calls for the introduction of a rigid fee-for-service advice structure.
Murphy said such a regime “could do more harm than good for consumers, limiting their choices and access to financial advice”.
