What Do Aussies Understand About Investing That We Don’t?

kangaroo-joeyOr the English, too, for that matter?

It’s not small potatoes.  It’s been called the most significant change taking place in the global financial advice industry this year.”

Investment commissions banned in Australia, U.K.

Starting this year, licensed financial advisors in the U.K. and Australia will be barred from charging commissions on investment sales.

Many experts are applauding the end of commission-driven investment sales in the two countries.

“The Brits have concluded that nearly every financial scandal has been the product of commission remuneration,” claims one commentator.

The Financial Times agreed, saying that the “commission-based culture had eroded consumer trust,” and perpetuated the myth of “free” financial advice, when in fact that advice was paid for by expensive and hidden commissions.

Several other countries such as India, Norway, Finland, Denmark and the Netherlands have also banned commission payments to advisers.

Comparisons with the U.S.

Here in the U.S., the situation is unfortunately quite different.

While our firm provides investment advice on a fee-only (no commission) basis, most firms continue to charge commissions.

Most investors don’t know, for example, that the term “fee-based” is usually used by firms that charge fees and commissions. Financial advisors receive commissions from product vendors as a reward for selling products to you.

This creates the potential for serious conflicts of interest. Are they selling you the product because (a). it’s a perfect fit for your needs and the best solution available, or (b). it’s pretty much suitable for you, although better and cheaper products are available (even though your advisor may not tell you about those) or (c). it’s not unsuitable, and the financial advisor got a big commission?

The “truth” is that you’ll never know the answer, until the day the U.S. gets on the no-commission bandwagon.

 

 

About Mari Adam

Mari Adam, Certified Financial Planner™ and President of Adam Financial Associates Inc, has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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