Naked pricing will be the next generation of adviser fees in Australia according to wealth management software solutions firm WealthO2.
Australia is still reeling in from a bruising year-long public inquiry into misconduct in the finance sector. The Royal Commission confirmed, in case after case, that banks and other major finance houses had long been guilty of defrauding customers of millions of dollars, including by charging fees for no services and taking money off the dead.
The country has moved to ban grandfathered commissions and set up a new code of ethic's standard that requires advisers to act in a client's best interest. Coupled with technology, this should ultimately shiftadvisory practices towards new pricing models.
Naked pricing effectively removes all of these hidden fees… [It] is about charging a fair price for the service being offered"
"It's on the basis of transparency and the fee for service model, that the naked pricing model delivers client benefits as well as a shift of margin away from products and commissions to the adviser," WealthO2 managing director Shannon Bernasconi told specialised news outlet MoneyManagement.
Naked pricing stripped out fees exchanged between third parties in the value chain of advice and disclosed only those fees payable to clients on a clean basis, void of revenue bias or conflict.
"Naked pricing effectively removes all of these hidden fees… [It] is about charging a fair price for the service being offered, with no conflicts of interest or revenue sources," she added.
Super funds and ASIC have been locked in a long-running battle about how funds disclose their investment and administration costs, which vary from product to product and make it difficult for people to compare them.
Next year, superannuation funds will be required to provide simpler statements that break down fees and costs as part of a move by the corporate watchdog to make it easier for fund members to understand how much they are being charged to manage their retirement savings.