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Good advice, affordable for all

This article in the SMH rehearses all the arguments in favour of what might be described as a professional advice industry: one based on fee for service, rather than any payment from the product provider to an adviser.

The promise of the title relies on a view that runs more or less thus: any advice received while being sold a product by a commission-remunerated salesperson isn't advice. Start with that principle then reductions in this kind of advice are all justified - because none of it counts as 'good'. Ban all of that and the expansion of fee-for-service advice that follows is an increase in good advice. Job done.

The argument becomes stickier when you accept that not all advice given by commission-sales staff is bad. Sometimes parallel services, such as general financial knowledge shared in countless 'guides' (like the ASB guide for new home buyers that I saw in the bank yesterday) are an important contributor to consumer knowledge. That has been found in the UK, but only after over-zealous regulation has made such advice all-but disappear.

The argument also begins to lack consistency when instead of removing conflicts of interest, you swap one for another. Take for example the permission to allow 'limited advice' by super funds on issues such as contribution levels and fund selection. A commission doesn't exist, but a payoff certainly does (the increase in contributions to the fund, or higher fees with clients switching to growth funds). Why is it okay for a large corporate to give conflicted advice but not okay for a third party financial advisory business?

In the medium term I will be glad to see more financial planning services operating on a fee for service model. As people get richer they will be better able to afford better advice. I just hope we don't lose a lot of good advice given in other channels in the pursuit of that worthwhile goal.

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