Independent Advisers

Yesterday in the Straits Times, Lorna Tan talked about independent advisers being bias due to volume discounts.

Regardless of volume discounts, advisers can never really be independent if their remuneration is based on commissions from the products sold.

Firstly, they having a range of product providers to choose from. Unless the commission amount is the same, this would be the perfect opportunity to select the provider with the highest commission. The commission structure is not transparent to the client, hence, they will never know.

Secondly, there is no fixed method/rule to needs based calculation. Figures can always be manipulated with estimates of rates of return, life span, expected inflation, projected expenses, etc. Therefore a shortfall of needs can always created for advisers to sell more products to earn more commission.

Thirdly, areas that do not have products with commission will be ignored. For example, Advanced Medical Directive, Estate Planning, Budget Management, Tax Planning, Holistic Investment Portfolio Construction, etc.

Having passed the FAA 8 years ago, more can still be done to improve the system. Perhaps following in the foot steps of Britain and Australia to abolish the commission based system to realize a truly competitive and independent system.