Regulator questioned on adviser pay stance

The regulator’s position on adviser remuneration has been questioned by the Federal opposition, who have implied that the watchdog did not have an adequate understanding of the fee-for-service models it has recently endorsed.

Two weeks ago, the Australian Securities and Investments Commission (ASIC) deputy chair Jeremy Cooper caused consternation among many financial planners by criticising commissions and praising moves by the likes of ANZ Financial Planning (ANZFP) and RetireInvest towards a “fee-for-advice” pay model.

But when questioned on his understanding of the ANZFP model by Labor Senator Nick Sherry at the senate estimates committee hearing last week, Cooper said: “No, we did not deeply examine the ANZ model.”

Cooper later went on to say that, prior to making his controversial comments, he had examined an ANZFP media release about its move to fee-for-advice. He said he had noted that people could elect to pay trailing commissions if they were not happy with ANZFP’s fee model.

But Cooper said his response to the ANZFP move was more an endorsement of fee-for-service in general, rather than an endorsement of the ANZFP model.

When further pressed by Senator Sherry to distinguish between ongoing fee-for-service and commission, ASIC chair Jeffrey Lucy replied: “From my perspective, the concept of a fee-for-service is exactly that: a service is rendered.

“I think that is really the significant difference between fees and commissions, in that commissions are payable without there being any necessity for an ongoing provision of service, expertise, advice or anything else, where the ANZ are apparently retaining this fee-for-service on the basis that there is a service provided.”

Lucy had told the committee earlier that while commissions were not “entirely inappropriate” in some circumstances, ASIC was “vocally supporting” a move away by some industry participants from commissions.

During the committee hearing, ASIC was also questioned on its investigations into the First Capital Financial Planning dealer group.

ASIC commenced court proceedings against the Sydney-based group last December, with allegations that it did not adequately inform its clients of the differences in fees before it moved them between investment products.

When questioned on the level of commissions attached to the switches, Cooper said: “They were at the high end of the range, but nothing in the order of Westpoint.

“We are talking about contribution fees of up to 4 per cent and then annual fees of 2.2 per cent. In the broad range of things, that is on the high end but not the extreme.”