Superannuation News: 08 Mar 2010
Australians could be paying $8.2 billion in superannuation commissions a year, triple what they pay now, if the Rudd government fails to stamp out the many hidden commissions that investors unwittingly pay financial planners...
.
In a report obtained by The Age, leading actuaries Rice Warner calculate that commissions on super funds could ultimately slice half a per cent from the nation's economic output by 2024 and cost national savings $117 billion.
It comes days after another controversial report into super estimated that more than 4 million Australians are paying commissions to financial planners without receiving any advice.
The latest report, commissioned by the Industry Super Network - the umbrella group for non-profit super funds - comes ahead of a top-level government review into the retirement savings industry.
The concern is that the government review will stop short of banning payments to product advisers including commissions, asset-based fees, fund manager rebates and so-called platform bonuses charged for administering an account, and allow a grandfathering of the existing trailing commissions for an extended period.
The Rice Warner report estimates that if the financial planning industry scraps all types of commissions and starts charging an upfront fee for advice, it will add 10 per cent to the country's retirement savings by 2024, which is equivalent to $117 billion.
The report debunks the perception that a ban on commissions would blow out the cost of advice and result in a massive fall in the number of Australians seeking advice, which, in turn, would decimate the financial planning industry. The industry directly employs more than 16,000 planners and thousands of ancillary staff.
Instead, the report estimates that a total ban on all types of commissions would double pieces of advice from 654,154 in the year to June 2009, to 1.2 million by 2018 as investors pay for simpler advice. The report estimates that 23 per cent of advisers would leave the industry, but average revenue per adviser would increase from $175,000 to $233,000 by 2024.
Rice Warner director Richard Weatherhead said: "A key conclusion from our research is that a ban on commissions and asset-based fees would not destroy the financial planning and advice industry.''
The outgoing chief executive of the Financial Planning Association, Jo-Anne Bloch, said the FPA had made it clear that it supported the removal of trailing commissions by 2012.
But the FPA proposals are far from ideal, say critics. Existing products would continue to attract a trailing commission.
Such changes are ''smoke and mirrors'' according to independent financial planner Scott Francis.
SOURCE: ADELE FERGUSON - The Age
|
|
