There is a brouhaha going on down under. It seems that the Australian Consumers Association has leveled its guns at the financial planning industry to rid it of taking commissions. These are the amounts that are paid to some financial planners for such things as servicing an investment portfolio. In that neck of the woods, it may be something like a half of one percent but the Association claims that when it is based on a total portfolio it can add up over a long period of time.

Now, understand that no one is claiming that financial planners shouldn't be paid for their services; it really comes down to the method of payment.

This consumer group says that commissions actually create a kind of structural conflict of interest for financial planners. What else is new? This claim has been going on for decades, it seems. The argument is that financial planners are supposed to be independent, objective advisors and not to be in the position of selling a specific plan just to reap a reward.

Many argue that the answer is a relatively simple one: have financial planners take a fee for services, the same way that attorneys and accountants do. The Financial Planning Association in Australia has been looking at that model for years now and in fact, has been encouraging its members to take the fee-based route.

What is happening here, and what will happen all over the globe, is a set of disclosure rules that require fees to be spelled out in dollar terms. It is no secret that for the longest time the industry itself seemed to the public that its advice is basically free but the specific selection of a stock is where the fee resides. However, most financial planners worth their salt realize all too well that what they offer in advice is really built around tax, Social Security, portfolios, risk levels, estate planning et al, understanding that the heart of what they should be doing and where their real value resides, is not simply what stock to buy.

Of course, I have friends who will simply take the free advice and then buy stocks themselves on the Internet.

What seems to be coming out of the debate in Australia centers around a key message for investors that they must understand what they are paying for and with financial planners to recognize completely what a full-blown financial plan is really worth.

Robin Bowerman who heads the retail index fund at Vanguard Investments, says that the key to making the successful transition from a commission-based business to a fee-based one is the ability to articulate where the financial planner adds value to the client. In short, "stop peddling the illusion that they hold some magical key to picking future investment winners."

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