This is an interesting article I received today talking about the changes that are occurring in the Australian Financial Services industry.
I find it interesting that NZ is going through a similar transitional period and therefor I take note of what is occurring in Oz as the odds are in favor of NZ following suit in many areas.
A review of submissions to the Ripoll Inquiry highlights at least four areas that potentially impact Financial Planning Practices
• Commission – debate around progressively removing or banning the payment of commissions (including trail or service fees) from product or platform providers;
• Licencee over-ride payments – greater visibility of subsidies paid to Licencees by platform and product providers in exchange for support; and debate on the potential conflicts of interest inherent in these arrangements;
• An emerging industry preference for the separation of Advice and Platform fees;
• Asset based fees – divergent views of the appropriateness of fees charged as a percentage of assets under management.
Pre-empting what might be recommended in the Inquiry, and what might ultimately be adopted, our response is as follows:
• Financial Advice and Wealth Management remains a growth industry, where the demand for quality Advice, exceeds the current capacity of the Industry. The cost of client acquisition, of complying with the present Financial Advice regime and servicing clients is expensive, limiting comprehensive Advice delivery to a small percentage of those who need it. To impose a remuneration regime(such as banning commissions) may be politically unsaleable if the ban carries the potential to further limit access by the ‘mid-market’, to Advice. That said we are on a journey that may ultimately separate Advice and Platform fees and reduce the ability of Adviser s and their Licencees to rely on commissions or over-rides.
• Review your current business model – determine the value you derive for Clients and charge separately for it. If you use an outsourced Asset Management model and external Platform prepare your business for the day you may not be able to collect fees for that activity from the Platform.
• Any move away from asset based fees would require significant structural change to the industry and threaten the viability of many funds management, custodial and advice businesses. It would also be out of step and unattractive to larger international funds providers to enter the Australian market – not an outcome that will encourage competition, so highly likely to be avoided.
