Industry Funds Financial Planning (IFFP) has strong reservations about the veracity of the Investment and Financial Services Association’s (IFSA’s) proposed fee-for-service model within its new charter on superannuation.
While giving a cautious welcome to the charter, which will require IFSA’s members to end commissions and trails, IFFP general manager David Haynes said the “devil of the proposed fee-for-service model is in the detail”.
“When we investigate what IFSA is calling a fee-for-service model in its charter, unfortunately we see that it is not really true to title.
“I’m not saying their asset-based approach is necessarily a wrong approach, only that a true fee for services model must ensure a strong nexus between the fees that are charged and the service that is provided.
“And this nexus can become less clear when you move from charging a fixed, up front fee-for-service on a dollar basis, which is IFFP’s very clear position on fee-for-service, to charging asset-based fees.”
Hayes added that IFSA chief executive Richard Gilbert’s comments on asset-based fees and other matters suggest he is already getting ready to qualify his position on fee-for-service.
“It may well be that over the next few weeks and months we will see a similar debate emerging within IFSA’s membership as has occurred within the Financial Planning Association (FPA), and a similar revision of its original proposal.
“We will watch developments over these next few months and weeks before we make an assessment of how serious IFSA is about addressing the conflicts that are inherent in commission-based systems.”
Haynes said a “similar announcement a few weeks ago in relation to commissions in the FPA space unleashed a vigorous debate among FPA members”.
“I think it’s probably fair to say that the FPA has already pulled back somewhat on its original pronouncements in response to those comments from its members.”
The FPA is now saying it is not actually recommending banning commissions at all, but is instead recommending a transitioning away from commission-based advice from 2012.
“Its new position, therefore, is it recognised that there are problems with commissions, and in a few years time it will address these.”
