No-commission advice - Who wins?

[yebiga]

Like the decline of non-bank lending in recent years, now the empire is striking back in the investment/super space. Make no mistake, in this false flag world of no commissions, the large product provider with a dedicated team of planners flogging their own product will thrive at the expense of smaller independent planners and investors.

Today, the typical investment/super account charges over 2% in fees. A quarter may go to the Planner but the greater share has and will continue to be paid to the Product provider: largely banks and their subsidiaries.

Let us not forget, the product providers approved the Storm Financial gearing products to pensioners, they who offered and paid the 10% commissions and repective loans to agri-business clients and it is they who continue to produce ever longer and more unfathomable Product Disclosure Statements.

In the no-commission futureworld, you walk into the CBA and the adviser recommends Colonial First State - surprise! The product will retain a built in management fee by the fund manager. The Bank will have to remunerate the planner and no doubt he will have incentives - What has changed?

All that changes is that the independent planner now has to charge you a fee up front for he can otherwise not survive. If like most people you can't pay upfront, you will go to your friendly bank.


This will result in far less choice or competition. The witch hunt against independant planners continues unabaited with ever more vexatious demands: licensing, compliance, ongoing education, auditing, personal indemnity, officious and unfathomable documentation requirements for FSG, FF and SOAs.

This industry, like the road to hell, is paved with good intentions.

 

[daddy_4_eyes]

Good post.

This whole commission obsession is nothing more than a witch hunt driven by people with their own agendas. I'd be more concerned about the quality of advice, the emphasis of reasonable basis for advice, level of education of those calling themselves advisers (RG146? what a joke!), ease of access (affordability) to advice by low income earners, retirees, etc.

People complain about trail commission, but its that trail commission that allows advisers to service clients with small balances without having to charge them for every transaction, for every phone conversation, for every consultation.

Rather than stop commission based renumeration, the watchdogs should instead ensure that advisers service all their clients adequately so that the trail commission is justified.

 

[Pornstar]

I tend to agree, i really don't think that they are getting to the root of the problem.

 

[Papa G]

What seriously shits me is that every media story I have read on this always mentions Storm Financial. Our business is so far removed from what Storm did it's not funny. It's like everytime something is written about the medical fratenity they mention Dr Jayant Patel.

The big winners out of this will be the banks and the big industry funds (little industry funds will get swallowed up). Midsize and larger firms that service higher end clients will be okay. I can't actually see the consumer winning out of this at all. It is extremely populist though, coupled with helping their mates in the Union Funds and the banking sector it's a no brainer for Kev and the gang.

 

[HigginsHawk]

Good post.

This whole commission obsession is nothing more than a witch hunt driven by people with their own agendas. I'd be more concerned about the quality of advice, the emphasis of reasonable basis for advice, level of education of those calling themselves advisers (RG146? what a joke!), ease of access (affordability) to advice by low income earners, retirees, etc.

People complain about trail commission, but its that trail commission that allows advisers to service clients with small balances without having to charge them for every transaction, for every phone conversation, for every consultation.

Rather than stop commission based renumeration, the watchdogs should instead ensure that advisers service all their clients adequately so that the trail commission is justified.

You sir, are spot on the money. As a CA, I have trained for years to reach this level of qualification as have many FPA members. You can become PS 146 compliant virtually by mail order these days.

Where do you stop the commissions? Is it any different from a lawyer saying no win no fee to take 50% of an insurance settlement?

 

[Snag Breac]

Interesting issue. But where can the little investor really get independent, professional advice? Thought I'd found a good financial advisor about 10 years ago - I was wrong, and once bitten, very reluctant to trust anyone.

I need some advice now - Colonial Super has done very little over past 9 years (not adding to it, admittedly, but still) and managed funds, scattered around a bit could be better. I'm thinking of rolling over super into something like VicSuper. Any suggestions as to who would be able to advise me?

Trying to be proactive, but haven't a clue.

 

[daddy_4_eyes]

Interesting issue. But where can the little investor really get independent, professional advice? Thought I'd found a good financial advisor about 10 years ago - I was wrong, and once bitten, very reluctant to trust anyone.

I need some advice now - Colonial Super has done very little over past 9 years (not adding to it, admittedly, but still) and managed funds, scattered around a bit could be better. I'm thinking of rolling over super into something like VicSuper. Any suggestions as to who would be able to advise me?

Trying to be proactive, but haven't a clue.

Step 1: What features are you after? Sounds like investment choice above all else. Will an industry fund (VicSuper) with only 7 investment options really satisfy investment choice?
Does Colonial Super have the features you are after? If not, shop around.

Step 2: What do you want your investments to do? Growth, stability, short term vs long term, etc.
Once that is identified, you invest your assets in the appropriate asset classes through various fund managers within your chosen super fund.

This is where an adviser comes in handy. Growth vs defensive. Various asset classes. Various ivnestment strategies within the asset classes (value, growth, neutral).

You say Colonial Super has underperformed. Relative to what? Your mates super fund? A benchmark? Your expectations?
Your adviser should review your fund regularly (you should agree on this with your adviser). Even though your preferred asset allocation may remain unchanged from year to year, it may be worth reconsidering your investment options.

Your adviser will use research by independant firms such as Morningstar & Van Eyk. to determine whether funds are worth holding onto.

 

[Snag Breac]

Step 1: What features are you after? Sounds like investment choice above all else. Will an industry fund (VicSuper) with only 7 investment options really satisfy investment choice?
Does Colonial Super have the features you are after? If not, shop around.

Step 2: What do you want your investments to do? Growth, stability, short term vs long term, etc.
Once that is identified, you invest your assets in the appropriate asset classes through various fund managers within your chosen super fund.

This is where an adviser comes in handy. Growth vs defensive. Various asset classes. Various ivnestment strategies within the asset classes (value, growth, neutral).

You say Colonial Super has underperformed. Relative to what? Your mates super fund? A benchmark? Your expectations?
Your adviser should review your fund regularly (you should agree on this with your adviser). Even though your preferred asset allocation may remain unchanged from year to year, it may be worth reconsidering your investment options.

Your adviser will use research by independant firms such as Morningstar & Van Eyk. to determine whether funds are worth holding onto.

Thanks for that useful guidance, daddy_4_eyes. Interesting point re: VicSuper. It would never have occurred to me to ask about the range of investment options. As for what I want - just lots of money with very little trouble.

But I'll now try to focus my mind with some diligence and consider the question of my expectations. I'd like to just pay for advice with no strings attached.