I have taken interest in a couple of newspaper and magazine articles published in the past few weeks, one from Bina Brown in the Australian and another from Leng Yeow in Asset magazine. Both look at the issue of rebates offered by the providers of Wrap services and make some subtle and not so subtle comments about the response of financial planners to these rebates. Neither of the articles paint financial advisers in a particularly pleasant light.
The crux of the story is that the big wrap account providers are providing rebates on the fees that they charge investors to use their services. One mentioned provider, MLC, have actually taken the bold step of not providing rebates but instead reducing the direct cost of their service to investors. The difference, compared to rebates offered by other providers, is that this takes the financial planner out of the picture. With other styles of rebates it is the financial planner's decision as to whether the rebate is passed on to the investor in full, partially or not at all. Leng Yeow's article actually suggests a financial planning firm are leaving the MLC wrap because they no longer have the right make this choice.
Our Response to Rebates
Our dealer group, FYG Planners, gives each financial planning firm the choice as to what to do with rebates. We at A Clear Direction receive a significant rebate from our preferred wrap provider, Macquarie, and have decided to pass on this rebate in full thus reducing the cost of investing for our clients.