Making the financial advice industry sustainable

its always good idea to increase fees and with the changes everyone it seems the regulators are not interested in the advice space for "small" clients. They are the ones that need help getting started.

Also has anyone given a thought that solicitors etc are way overcharging for the services rendered-again where is the control

If you know the history behind trail commissions you will then understand the reasoning behind trail commissions. Back in the 80's, the industry had up front commissions in the similar way a "car salesman" gets remunerated. In the late 80's the forces that make up our industry developed this idea of not taking 100% commissions upfront but taking 90% upfront with the 10% taken as a trail commission. In the early 2000's the same industry forces came up with the idea of calling the trail commission an "Adviser Fee". Unfortunately, the forces, both in the industry and outside the industry have misconstrued the term "Adviser Fee" to mean that if you don't do any work for the client then you shouldn't be paid.

From many conversations I have had with the legal profession I know they have always had a "beef" about our industry receiving trail commissions/adviser fees and that this shouldn't happen. With the Hayne royal commission, the legal profession was predominately represented by the legal profession who cast the "fee for no work" motto as being this "evil" form of remuneration. Our industry has been infiltrated by these people with their "misconstructions" who have no idea about how "trail commissions/adviser fees" came about to be.

Unfortunately the genie is out of the bottle and it's a pity that these trails/adviser fees are taken out of context as the history of them has been forgotten. It seems that we're now going back to 100% upfronts by way of "Adviser Fees" as it was back before the 80's change. No wonder the cost of financial advice has gone through the roof!

Yes James, you are 100% correct. Some of us have been around before default compulsory super & remember the countless investors who were not being serviced (due to the upfront commission system prior to 1990). It got so bad, even Estate Executors didn't even know about investments held by the deceased. Hence "servicing fees" were introduced to keep investors up to date. With Hayne2, we have now gone full circle - so similar outcomes have started already. What an absolute disaster for regular (non-wholesale) investors.

Once the regulators remove the lifetime responsibility (or at least until the next time the client gets financial advice) for the advice given, then we can talk about ongoing fees.

Your observation about a motor vehicle salesman is trite. The MV salesman isn't legally bound by a duty of care, or best interests duty. They aren't responsible to ensure that of all the motor vehicles the purchaser COULD buy, the salesman must recommend the best one for the buyer after giving consideration to all the facts. He isn't required to know all the features of every other car and to work out which best suits the buyer. He sells what his dealer gives him to sell.

After purchase the salesman isn't responsible for that MV for life, as with financial advice. He doesn't have to be able to justify a decade later why THAT car, why not a DIFFERENT car. He isn't required to have documentation showing the reasons why this one was better than that one, the considerations he undertook, the various features & benefits and LIFETIME running costs thereof.

The accountant prepares the tax lodgement and says specifically "All care taken, no RESPONSIBILITY accepted". Try saying THAT as a financial adviser.

I have seen, as I am equally certain others will too, endless examples of accountants recommending a 'tradie' earning $90kpa set up a family trust, company, & partnership for 'tax planning' purposes.

They then set up an SSMF for the combined $150k the tradie and his spouse have in super. The ONLY thing done successfully in this is to increase accounting revenue.

No, your thoughts are way off the mark for the true comparison between advisers and salesman (and that includes accounting salesmen).