While the debate over adviser charging methods has raged for years, it is not until now that a firm idea has been put forward on the direction the industry should take.
Essentially, the FPA is proposing that by 1 July 2012 all members should move away from charging commissions to a fee-based or client-directed remuneration model.
The association is also recommending that from 1 July 2012 product providers should no longer determine the remuneration of financial planners.
The proposal sets out six principles that the FPA believes should underpin remuneration.
The underpinning principles focus on transparency, the separation between product and advice, and consumers having a greater understanding of how much they are paying for advice.
The FPA's decision to recommend changes to the remuneration model of advisers was prompted by the federal government's announcement of a financial services industry review.
The plan to abolish commissions was welcomed by some large financial organisations, including AMP, MLC and the Investment and Financial Services Association.
Others have viewed the proposal as outrageous.
Granted the proposal, if successful, is not expected come into effect for another three years, many believe it has the interest of the large institutions in mind.
Larger institutions with strong financial ties will weather such an evolution of the industry with ease. Smaller privately-owned advice houses may struggle.
Not only would a fee-for-service model mean charging arrangements would change between the client and their adviser, it would also mean the fee structure would change between the adviser and their dealer group and from the dealer group and product provider.
While the FPA's proposal is pushing for greater transparency between advice and product, for many the change of structure may be too much.
For others the only thing to do now is jump organisations.
What do you think of the FPA's proposal?
