While the Future of Financial Advice (FOFA) reforms' best interest duty may have several interpretations, the preference of certain products over equivalent products that are potentially cheaper will be "unjustifiable", according to Blue Point Consulting director Tony Bates.
The measure should also mean greater choice on approved product lists (APL).
There needs to be better comparison between products, particularly in wrap and platform offerings where an asset-based fee is charged for administration, Bates said.
"Perhaps the real elephant [in the room] is the obligation that an adviser has to the client to properly compare alternatives," he said.
Bates said if there is a clear product superior in price and no different in service, APLs have an obligation to include them.
"As an adviser, you get to see the advice of other advisers when a new client comes to you, so you get to see what they're recommending. While the adviser recommends different managed funds from different fund managers, they invariably only recommend one wrap account, which is the one they're aligned to.
"That ultimately is the problem."
He said administration services should never have been remunerated based on the dollar value of the account.
"At the heart of it, [if you compared] a $10 million wrap account and a $100,000 wrap account, there is no extra administration work or complexity involved between those two accounts."
After 25 years, Bates has opened the first wrap account for his clients using the first flat fee administration wrap offering. He headed Macquarie's private banking division during the birth of Macquarie Wrap in 1990s but would not support it.
"There hasn't been a wrap account in the marketplace that has recognised that the costs are not different for those two accounts [but] this is the first time that I've ever seen in 20 years, a flat fee wrap," he said.
