If the financial advice sector is forced to drop commission payments then it could risk leaving consumers with a handful of corporates offering them vanilla advice, says National MP Andrew Bayly.
Speaking during the 17 February Future Ready Advice Summit, the former merchant banker told FSC CEO Richard Klipin that while there’s a big focus on fees by the regulator, “fees need to be in the context of the nature of the advice given”.
“If we keep going down the fee structure, then what we will end up with is just large corporates delivering vanilla packages to people,” he says.
“And in many cases, people want a tailored package and a personal relationship with a financial adviser.”
Bayly, National’s spokesperson for commerce and consumer affairs, says financial advisers need an environment where they can “…make sure the advice given is prudent, practical, and appropriate to that person”.
“That balance is a major issue that is part of a major debate within the industry at the moment,” he says. “I want to make sure we don’t end up driving the market by focusing on fees as that won’t serve many people at all.”
Turning to the Government’s proposed State-backed income insurance scheme, Bayly says there’s little scope for insurance companies to be involved.
“I don’t think we need the scheme,” he says. “It is a very expensive scheme, far more expensive than I thought it would be.
“But the big question is ‘do we need it?’. I don’t think we do. And if you got past that, then the next question is ‘when would you introduce such a thing?’ because of the implications for business owners and employees.”
If the scheme is implemented it will be funded by a 1.36% tax on both wages paid by employers and received by employees. It would raise between $3.5 billion and $4 billion a year and give employees 80% of their wages for seven months if they lose their job.
“I don’t think we need the scheme because there is a lot of Government support around helping people get back to work,” says Bayly.
“And given the scheme will be managed by ACC I don’t see any opportunities for the insurance industry.“