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Leading financial planning firm Godfrey Pembroke Limited (GPL), a wholly owned subsidiary of MLC, today announced that it was moving to a fee for service only model on investment advice for all new clients from 1 October 2006.
"Given that many GPL advisers are already charging fee for service and that commissions are constantly coming under fire for creating conflicts, advisers felt it was time to make a decision as a group to lead the move away from commissions on investment products," said Mr Mark Rantall, Managing Director of GPL.
"There are two main differences between a fee for service and a commission:
1. With fee for service the fee is agreed between the adviser and the client, not the adviser and the investment product issuer; and
2. The client can make the decision to stop paying the fee if they decide they do not want to receive further advice for a period of time. These qualities reflect the FPA's Conflict of Interest Principles."
"Fee for service ensures that control is in the hands of the client and enables advisers to have a much simpler conversation about how they will be remunerated for the advice they are providing."
"When a client pays for service via an explicit fee there can be no confusion around how much they are paying, who they are paying the money to, or what services they are receiving for their money," said Mr Rantall.
"By separating the adviser's fee from the actual investment recommendations, the risk of a conflict of interest is significantly reduced because the adviser will generally receive the same fee regardless of the specific investments recommended."
GPL advisers' decision to move to a fee for service model will be written into the licensee standards. Advisers must either use a fee for service platform or rebate the commission built into other investment platforms.
The fee can be an asset based percentage or flat dollar amount and can be paid via credit card, direct debit, cheque, a cash management account, or through an investment platform.
Mr Rantall said the move to fee for service would apply to all new investment clients from 1 October 2006. Initially, commission arrangements with existing clients will be maintained unless otherwise agreed with a client.
"This is about building a business model for the future and providing greater clarity to the client on the cost and value of advice," Mr Rantall said.
Ends
Further media information, please contact:
Stacey Mitchell
Corporate Affairs Manager, MLC
02 9966 3035
0400 305 446
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