Thanks to recent government reforms, the financial planning industry has had to radically overhaul the way advisers are remunerated. A call for greater transparency and accountability has created renewed enthusiasm for ‘fee for service’ models as opposed to the traditional commission based models. Commission payments are still the dominant income stream for the industry, but greater awareness of the true cost should ultimately lead to a better deal for the consumer. Some important questions must be asked before entering into a relationship with an adviser, including:
– If the advice appears to be ‘free’, what is the total cost once commissions are deducted. These include entry fees, ongoing management fees, service fees, percentages of total amounts invested, upfront and trailing fees on insurance policies and various incentives direct to the adviser. Often this adds up to substantially more cost to the consumer, despite the initial advice appearing to be ‘free’.
– On a commission based structure, are you investing in products which best suit your needs, or ones that pay the best commission to the adviser?
– Is your adviser able to suggest options from any investment vehicle, for example direct property, or are they limited to recommending from their ‘preferred product list’?
– What is the cost of poor advice? It is often said that we get what we pay for in life, so it is worth considering if the cheap or ‘free’ option will cost more in the long run due to short sighted or incorrect options being taken, or tax implications being overlooked.
At CNS Financial Solutions, we believe in focussing primarily on the advice, with actual investment options forming the final stage of the process after the plan of attack has been formulated. We are proud of our knowledge, experience and ongoing efforts to educate ourselves and believe that we provide excellent service and value for money. Working on an hourly rate for our services enables us to avoid taking commissions and concentrate on what is the best option for our clients without any conflict of interest.