In this article in the Sydney Morning Herald, published on Saturday, the following quote was attributed to the IFSA (Investment and Financial Services Association):
'Commissions allow people to access advice and pay for it over time via their savings," IFSA says. "Commissions also tie the interest of the consumer and the financial planner, and give an incentive for the planner to maximise a consumer's savings'
I simply can't stand to see such a ridiculous comment go unchallenged. In my opinion commissions do exactly the opposite. For starters, a financial planner who relies on a commission model will only recommend financial products paying a commission. Secondly, the size of a commission is capable of distorting the advice given by a financial planner - just look at the Westpoint Collapse where financial advisors were accepting high commissions to put their clients into ridculously high risk investment 'products'.
More than anything, commission payments make financial planning a sales game. I don't believe this aligns the interest of financial planners and consumers at all. Indeed, consumers go to a financial planner looking for advice, not to be sold to.
Every other profession charges for its time on the basis of a fee - this is the model of what a profession is. Any suggestion that taking an ongoing trailling commission from a product recommendations is a more professional fee structure is, in my opinion, rubbish.