Michael Pascoe writes:
The company with Australia’s second-largest network of financial planners, NAB’s MLC, wants to ditch the commission model for paying them, according to today’s AFR.
In a front-page story, The Fin quotes MLC CEO Steve Tucker as calling for an end to the commission system in both an interview and a speech to the Committee for Economic Development of Australia yesterday. (That could be a little embarrassing for the Oz which this morning runs an edited version of that speech without mentioning anything about the structurally corrupt commission business.)
Tucker going strongly public against the commission model will add to the tension already bubbling in the Financial Planning Association – a body wedded to commissions by the sheer weight of members relying on that system.
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For MLC, Tucker’s stance is taking another step in a direction the MLC was already heading. When ASIC’s latest expose of financial adviser shortfalls and theft hit, the FPA officially went into denial, but MLC’s head of planning sounded more rational in a Moneymanagement.com.au report:
FPA board member and MLC head of planning Matt Lawler responded to (ASIC executive director) Tanzer’s presentation by calling on industry to embrace the findings of the survey “without the emotion” that accompanied the initial ASIC shadow shopper survey in 2003.
He said the industry had reacted to the initial ASIC survey in “three different phases – the storm, the norm and the perform phases”.
“Why don’t we just skip the storm phase this time around,” he exclaimed
He said that “over the next little while” the FPA will work with ASIC to identify the core compliance issues revealed in the survey and to work through these. “If that means banning some things and if it means altering some things, then I think this industry has proved that were up for it.”
Maybe. The prize for MLC is to grab some moral high ground while the planning industry runs the risk of being wagged by its commission-rorting dogs. Should MLC unilaterally run hard, instead of just making pleasant noises about what everyone should do, it could exert enormous pressure on the rest of the pack. At some stage, reason just might prevail over self-interest.