Letters 23/11

First Samuel managing director Anthony Starkins’ submission to the Senate calling on Government to outlaw commissions (Money Management, October 26) could be interpreted as a classic case of "bother you Jack, I'm alright attitude.

In his current role Mr Starkins is clearly not having to earn a living at the coal face like the vast majority of self-employed financial advisers. One can almost picture Anthony standing in front of the mirror, with his hand on his heart declaring his allegiance to the holy grail of ethical "fiduciary" standards.

To argue that advisers who receive commissions are breaching their "fiduciary" (a word he clearly likes) standards, is a load of humbug!

At the end of the day, clients are paying for our service one way or the other. To suggest customers do not understand the full disclosure of commissions given to them in big bold print is, to the say the least, patronising. Our experience is that clients clearly understand how we are remunerated and the vast majority are very relaxed about it.

If commissions were banned, how would the vast majority of advises survive in regional areas where customers are unlikely to embrace a high fee regime available to the top end of town?

Is Mr Starkins also advocating a no commission regime for risk business? Does his aversion to commissions extend to the real estate, motor vehicle and other commissions based industries?

If Anthony Starkins genuinely has no commercial agenda to promote, then he needs to re-think his spurious arguments, because his proposal is at best misguided and at worst, self serving and moreover, certainly not in the best interests of most customers or advisers.

Brian Handley

Brian Handley & Associates

Moe (Victoria)

Proper Authority Holder

Colonial Financial Services

I read with interest your interview with Anthony Starkins regarding the fees v commission debate. I feel compelled to put some comments in perspective.

To begin with, the debate in itself does not exist. All supposed "fee-for-service advisers" that I have encountered, charge some form of percentage based charge. That is not fee for service.

What is the difference between a commission paid to an adviser from a fund manager or from a client? None as long as the commission paid by the fund manager is properly disclosed. If Mr. Starkins feels more ethical in some way by calling it a fee, so be it, but it is not an hourly fee for service type arrangement that one would receive from a solicitor or accountant.

In my experience high net worth clients do feel more comfortable with the commission by arrangement style of charging. Isn't this the type of client Mr. Starkins' company markets to? Yet he states he has "no commercial agenda" in his views. I don't remember him making such views public when he worked at Norwich. Did he get some blinding flash of ethics or do Norwich pay commissions to advisers?

It would be wise to remember that the vast majority of Australians are not high-income earners. I'm sure Mr. Starkins wouldn't give the time of day to a lot of my clients. Married, two kids, combined income $100,000, mortgage, $30,000 in super, no surplus income after reducing their mortgage, worried about education and job security. He should ask them how they feel about an adviser receiving a fully disclosed commission from their superannuation (and I'm talking straight 3-4 per cent not some high commission long-term plan) and using that as remuneration to advise them on many areas of their financial life.

However I'm quite sure someone making such radical submissions to the Senate would have interviewed a wide cross section of the Australian population.

Especially as he has "nothing to gain" from the debate.

Personally I believe a lot of people just would not or could not seek advice if they had to write a cheque for it. You only need to look at the billions of dollars in unclaimed superannuation monies to realise that the retail sector bears no relationship to the institutional/high net worth markets.

To use examples of advisors being offered holidays as justification for banning commissions is ludicrous. Should all trust accounts be outlawed because a crooked solicitor absconds with client monies? If you have a broken finger, you don't amputate the whole arm! You focus on healing the finger. I don't know of any adviser so stupid, they would put an investor into an agricultural scheme to win a holiday!

If Mr. Starkins is truly committed to offering better advice to retail financial services, he could start by refraining from such elitist, ill thought out opinions.

Such draconian measures would only result in the general population receiving less, not better advice.

Gerry Lenihan

Nexus Personal Planners

I am writing in response to the column by Tom Collins in your most recent issue (Money Management 9/11/2000).

I would like to state that The Financial Planning Association (FPA) has always worked hard to meet the expectations of an expanding and disparate membership. The Association has always been an inclusive body which develops policies and services to meet members' needs. Policy is generated by standing committees, which are made up of members with relevant expertise and interests.

The work undertaken by these committees in public policy, education, public awareness and professional standards ensures the Association is positioned as the peak body in the financial planning community. They also create policies which build consumer confidence and trust in the quality of financial planning advice.

When it comes to member input, the facts speak for themselves. A national board, four major standing committees, 17 taskforces/sub-committees all entirely comprised of members, sets the FPA agenda and direction.

We rely on this structure as the most democratic, efficient and effective means of running an organisation. Of course, feedback from individual members is always welcome.

Consultation is continually extended to principal members and the wider membership through a number of channels. The FPA is currently expanding opportunities for member input through web-based technology and more grass-roots forums. We welcome ideas on other feedback streams. The ongoing success of the FPA heavily relies on the contribution, commitment and expertise of our members. So I urge all members who have something to contribute, to get involved through the structures, which have helped build an Association and a financial planning community.

The FPA Chapters play an important role in the flow of information throughout the membership. Their key function is as a local presence for the delivery of education and networking. They are also a conduit for member feedback on local needs and concerns.

The FPA has grown rapidly to meet the needs of an expanding membership. A key part of this growth strategy is the employment of specialist professionals within the Association. This in-house specialist skill base brings experience and knowledge which complements our valuable member contribution. The input of professional staff also provides a valuable external perspective to assist the standing committees in policy development.

Currently, the committees and taskforces are working on a number of key projects which was raised in Tom Collin's letter. At its last meeting, the board considered a paper on the FPA's positioning on the fees and commissions debate and restated its commitment to disclosure and a focus on consumer education.

The Association has identified the Alienation of Personal Services Income legislation as a key business issue for planners and the structures under which they operate. The FPA's public policy committee and tax sub-committee have been working around the clock on this issue. A vigorous political campaign orchestrated by the FPA should yield positive results in the coming days.

The FPA is committed to an inclusive structure and always welcomes contribution, comment, and feedback from its membership, particularly through the standing committees.

Finally to you Tom, I extend a personal invitation to get involved at the committee level - to come on board with those members who put in the hard yards at the coalface of policy development. In the meantime, you may wish to read the FPA's Annual Report, the monthly Chairman's Brief, Financial Planning magazine or to visit our website to inform yourself about all the exciting projects we are currently undertaking.

Ken Breakspear

Chief Executive Officer

Financial Planning Association