Monday, March 02, 2009

The cost of financial advice

Currently there's a big debate on whether financial advisors should be compensated using a fee-for-service model or a commission model. The Sydney Morning Herald chimes in with an article by Simon Hoyle. The conclusion, based on recent research:
...consumers pay 13 times more for commission-based advice than for fee-based advice.
Alan Kohler has argued that commission-based advice gives the planner the wrong incentives. That is, planners will recommend investments based on their commission structure rather than the return they will provide for their clients. (See his article "Too Little, Too Late" on the Business Spectator site). The new research cited by the SMH adds more ammunition to the fee-for-service side of the debate.

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