It’s more than five years since conflicted remuneration for financial planners was banned, meaning planners would no longer receive a payment or commission to distribute financial products from the product issuer.
Unfortunately, the ban did not apply to all forms of financial product, and planners continue to receive commissions on insurance products, as well as receiving commissions on “grandfathered” arrangements – arrangements that were in place before the ban on conflicted remuneration was in place.
In light of the findings of the Royal Commission into misconduct in banking and financial services, many commentators are predicting further regulation to close these loopholes, and some players have announced they will stop taking commissions.
Nonetheless, it appears the payment of commissions is hard-wired into the financial services sector. Recent data suggests a significant number of financial planners continue to rely on commissions for a large part of their income, highlighting just how entrenched the sales culture remains within parts of the financial advice industry . Around a quarter of advice practices derive 25% or more of their revenue from grandfathered commissions, with 10% deriving over 50% of their income from them. (Source: Professional Planner October 2018)
Industry funds have always seen advice as a service. We spearheaded the campaign to abolish commissions and have never paid commissions to financial planners, or relied on commissions to support our business. Our financial planners largely avoid recommending products that pay commissions, or arrange for the commission to be paid to the client.
In some instances, it is not possible to stop commissions being paid to IFS by providers of financial products.
Where commissions can’t be rebated, these are donated to charity.
This year IFS has chosen Fitted for Work to receive a donation.
On Wednesday November 14, IFS presented a cheque for $50,000 to Fitted for Work.
Fitted for Work is an organisation dedicated to assisting women experiencing disadvantage to get back into paid employment.
Cath Bowtell, Chief Executive of IFS says, “Like many other organisations and individuals in the not-for-profit super sector, IFS cares deeply about the gender gap that results in women retiring with 47% less superannuation than men and 30% retiring with no super at all. In fact, 40% of older, single, retired women live in poverty”.
When it comes to building retirement savings, factors such as lower pay, running a single-parent household, and time out of the workforce to raise children can make it challenging for women.
“That’s why we’re proud to be able to support Fitted for Work. The invaluable work of this organisation assists in building women’s confidence and skills. The dedicated team provides a range of services that are so important to women in securing a job and building certainty for the future.”
Ms de Zwart said “We are incredibly grateful for the support of Industry Fund Services. At Fitted for Work we focus specifically on helping women gain and maintain employment not only because work provides financial security but also a sense of social connectedness, dignity and pride. We believe that when a woman is Fitted for Work, she is Fitted for Life. Without any recurrent Government funding, we rely on the generosity of supporters like Industry Fund Services to keep our doors open and our services free to the women who need them. This donation will allow 330 women facing adversity to access to a range of services including resume support, interview skills development, our mentor program, workplace experience, personal outfitting and much more. Thank you.”
Staff and business partners of IFS and Fitted for Work, attended the presentation on Wednesday evening and were invited to get involved by bringing along items to donate such as quality work-appropriate clothing, shoes, handbags and other accessories which are always in demand. The drive was a huge success and resulted in an abundance of high quality items that will be extremely valuable in helping women get back into the workforce.