Fee for service the professional way forward

REAL estate veteran Paul Conti has a goal that is shared by people working in many industries – he wants to elevate the standing of his profession.

And he believes the best way to do that is to move away from sales commissions towards ‘fee-for-service’ remuneration.

“A fee-for-service base would elevate agents to the level of other professionals such as lawyers, architects and engineers,” Mr Conti said.

The Time Conti Sheffield principal said it would also provide an incentive for agents to create a career rather than just being high-flying sales people.

“I want to attract more professional people into the industry,” he said on the occasion of Time Conti Sheffield’s 60th anniversary.

Mr Conti’s proposal echoes the vigorous debate in the financial planning industry over the use of commissions, which are often cited as compromising the independence of advice.

The federal government’s contentious Future of Financial Advice reform package has brought the issue into sharp relief, with the major accounting bodies also buying into the reform debate.

All major professional bodies accept the merit of fee-for-service remuneration, and to this extent they support the FOFA reforms.

CPA Australia and the Institute of Chartered Accountants, for instance, have encouraged their members to adopt fee for service and ban volume-based remuneration structures since 2005.

The Financial Planning Association came to the party later, approving a remuneration policy in 2010 to remove investment commissions and improve client disclosure. The policy will come into effect in July this year.

Both groups continue to have major concerns with the FOFA reforms.

The financial planners want to remove the opt-in renewal provision, which requires advisers to contact clients every two years to renew their agreements.

Among other changes, they want to allow for commissions to be payable on certain insurance policies.

The major concern for the accounting bodies is the planned removal of their licensing exemption, which allows accountants to provide limited advice on self-managed superannuation funds without the need to hold a licence to provide financial product advice.

The current exemption allows accountants to provide important strategic advice to their business clients, without straying into product advice.

Financial services and Superannuation Minister Bill Shorten’s recent announcement that the mandatory application of the FOFA provisions will be deferred by 12 months to July 2013 has been welcomed, giving industry groups more time to press for change.

Financial Services Institute of Australia chief executive Russell Thomas believes the FOFA reforms should be seen as just one aspect of a broader agenda of raising professional standards and credentials.

He said Finsia’s financial services professional (FSP) credential, which can only be obtained after applicants submit a portfolio of workplace evidence and complete a panel interview, goes some way to addressing this challenge.

Mr Thomas also welcomed federal government plans to introduce an examination for people wanting a financial services licence; currently they just need to meet defined competencies.

“It’s a very positive step for re-setting the bar,” he said.

CPA Australia, which recently signed up its 10,000th WA member, has added to its range of professional development options by launching an online series called The Naked CEO, which features successful executives sharing the lessons from their business experience.

While The Naked CEO is pitched at students, Chartered Secretaries Australia has reported growing demand for mid-career professional training and education, such as its Graduate Diploma of Applied Corporate Governance.