Industry funds claim more needed on adviser commissions

The Industry Super Network, the organisation that has been the most vociferous critic of commissions paid to financial advisers, has welcomed Friday’s announcement by the Financial Planning Association that it will be phasing out commission arrangements.

Reacting to the FPA announcement, Industry Super Network executive manager, David Whitely said, however, that financial advice needed to be truly disaggregated from sales in order for the financial planning industry to be elevated to the status of profession.

He said that while the FPA’s announcement last week was a step in the right direction, the consultation paper upon which the move was based fell short because it under-estimated the nexus between remuneration, conflicts of interest and professionalism.

Whitely used his comments on the FPA proposal to revisit the argument that financial planners should be legally required to act in the best interests of their clients.

He said the only remuneration model consistent with a best interest obligation was a time-based fee paid directly to the client.

“Commissions, asset-based fees and soft dollar remuneration will create conflicts of interest for financial planners that are inconsistent with a best interests obligation,” he said.

Whitely also called for the abolition of trailing commissions arguing that automatic ongoing fees needed to be prohibited with clients required to “opt in” to paying fees each year, rather than requiring consumers to “opt out” of ongoing fees.