Already this year, a mixture of large financial services companies, mid-tier and small financial planning practices have embraced a fee-for-service model.
AMP Financial Services gave itself a 1 July target to shift its current model to a fee-for-service-only model, and Colonial First State is said to be on an accelerated transition path, which will be completed by next year.
National Australia Bank (NAB)-owned advisory group Godfrey Pembroke announced its plans to transition to a holistic fee-for-advice model.
While the group has been a long adopter of a fee-for-service model under NAB, it said it would transition to a holistic advice model for 100 per cent of its client base.
“We are seeing significant demand in the private advisory market for a 100 per cent fee-for-advice proposition. This demand drove our decision to take our fee-for-advice offer to the next level,” Godfrey Pembroke general manager Tom Reddacliff said.
“Our goal is to be a 100 per cent fee-for-advice network on super and investments by 1 October 2011. We are still working through our target date for insurance and mortgage products, but we are making a clear commitment to our clients that this is the direction we are heading in and we will deliver on this promise.”
Godfrey Pembroke has a network of 183 self-employed financial advisers who manage around $6 billion in funds.
Privately-owned dealer group Infocus Money Management is also set to roll out a fee remuneration model across its practices by mid-year.
The new model would be implemented within the group’s 65 practices by June 2010, the group’s managing director, Darren Steinhardt, said.
The fee-for-service model follows on from the group’s self-managed superannuation fund administration system, which it rolled out this year.
Yet as the industry continues along its adoption of the FPA’s fee-for-service proposal, one advice chief has turned the focus onto commissions within risk products.
Hewison & Associates chief executive John Hewison has moved to stamp out commissions on insurance polices.
Hewison, a former FPA chairman, said his firm would rebate all commissions received back to insurance policy owners and, instead, charge for the advice provided to establish the policy and review it annually.
While Hewison would not be the first to make such a change to allow for greater transparency within his business, he is one of the first to speak publicly about the need for further discussion on insurance products and commissions.
His comments come almost a month after the FPA announced that commission payments should continue on risk products.
“Until we are able to deduct the costs of upfront fees as a tax deduction, then commission-based advice remains the most cost-effective manner by which the widest range of consumers can secure insurance cover,” FPA chief Jo-Anne Bloch said at the time.
What is your view on commissions and risk products?
Do you think a fee-for-service or other model should be adopted within risk products?
