MLC boss Steve Tucker has hit out at commission-based remuneration models and shelf space fees, saying financial planners need to discard the sales culture of the past.
Tucker, a staunch advocate for fee-for-service advice, said too many in the financial services industry have persisted with sales-based distribution models inside a regulator framework that is moving in the opposite direction.
"[Financial services reform] FSR was always meant to give greater importance to the delivery of sound and professional advice," Tucker told the American Chamber of Commerce yesterday.
"If we are to get maximum benefit from our retirement income policy, then the response by the industry to regulation must be the right one."
Tucker said anecdotally, fee-for-service advisers are growing their businesses faster than those on commissions.
He added that those who are highly reliant on product sales will face difficulty explaining that the customers' interest is paramount.
"The surest way to build a sustainable and profitable business model based on the provision of advice is to move to a model where revenue is generated by providing advice and not for products sold," he said.
"This means discarding the sales models of yesteryear."
He said shelf-space fees remain problematic.
"If some of this fee is paid to the adviser or their licensee...like it or not it has the ability to influence the decision on where advisers choose to invest client's money."
Tucker also called for a rethink regarding the adequacy of the country's retirement savings, saying the shortfall could be relieved if the nine per cent super guarantee (SG) were increased.
"Some Australians have taken false comfort that the SG will deliver them a comfortable retirement," he said.
He quoted industry statistics that point to a retirement savings gap of $425 billion, or $93,523 per person.
"Adjusting the SG is the quickest and most sustainable way in closing the retirement savings gap," Tucker said.
MLC is experiencing increases in volumes of between 200 to 300 per cent on the same period last year, driven by the Government's super changes, he said.
