Advisers takes on LIC/LIT industry lobby

From financial adviser Trevor Geffin from Core Private Wealth to the LIC/LIT industry lobby over at Livewire:

Dom the issue at hand here is not the merits of a LIT/LIC structure, nor is it the merits of the underlying investment, nor is it Chris Joye's fund.

As an adviser, a supposed beneficiary of these fees, I want to see these gone, they are a stain and I don't trust my peers to not abuse them as there is no evidence to the contrary.

In the context of FOFA, FASEA and other recent regulatory interventions, these fees represent a scar for the industry and represent a time in the past we are trying to totally incinerate.

This is the last vestige of conflicted investment remuneration and this debate and the fee are tarnishing are our reputations and our profession. Moreover they are a raw deal for consumers who think they have a fiduciary advising them in their best interests.

I quite frankly don't give a rats about debating any manager or any particular product, that is for another debate, this is about the stamping fees being paid to licensed advisers who are subject to a best interests duty and a code of ethics. The "disinterested person" is not going to be convinced this variable remuneration doesn't cause a conflict, sorry.

It is also an absolute insanity after the RC to believe financial intermediaries will simply "do the right thing" in the presence of a strong sales incentive, this idea is demonstrably false and there is little support for this assertion.

The intermediaries have unbelievably strict laws governing them and receipt of these fees are close to unworkable in any case. This means the best interest duty and indeed the FASEA code are going to get violated at SCALE by these fees.

The conflicted advisers are sowing the seeds of the next mass remediation, class action and conflicted advice crisis, as inevitably ASIC will seek their teeth into these files given the public campaign.

They are going to find a dogs breakfast of advice and compliance with the best interest duty and the code. If ever there was writing on the wall for advisers, here it is, if you are an adviser, don't go near this, you are an audit away from pain.

As for you lobbyists and product manufacturers, go for your life with LIC raisings and good luck to you. Keep the products flowing, just don't pay comms. If your investments are good they should surely stand on their own merits, its a sad indictment of the products if the business model is totally reliant on a conflicted sales force.

And then from Matt Christensen at Hill Capital, also posting on Livewire:

Chris, may your pen keep moving this debate forward, and to the more representative populace (i.e. people who pay/suffer from Stamping Fees; rather than those mostly employed on the back of Stamping Fees).

Paul Heath who with Chris Joye has led this recent push for removing conflicts are both elevating the entire industry, whether we like it or not.

Pretty soon, every investor with a $10 million+ asset pool, will be aware of the Conflict/dynamic on this issue, and how a conflicted stamping fee impedes objectivity.

The HNW' 2021+ choice of Broker, Fund Manager, Adviser will impose a great cost on those who fight for the right to pay/receive conflicted stamping fees today.

In the same way that the HNW abandoned Big-4 planners (spurning the boutiques of the last decade), the HNW too will abandon those who are today in anyway involved or supportive of Conflicted Stamping Fees.

The regulatory arbitrage that LIC's and LIT's possess needs to go, NOT because it has necessarily been abused by the Issuers; and Andrew Lockhart highlights how shareholder friendly Metrics have been. It needs to go because conflicted stamping fees poison the mind of those involved. Stamping Fees are very powerful, as Richard Murphy's comments clearly attest to, and it is their effectiveness in raising FUM, that inspires the strong defence/arguments for status quo.

But no-one defending Stamping Fees are answering the key questions Paul Heath and Chris Joye are asking! And pretty soon, all affluent and informed consumers will be asking tough questions about Conflicted Stamping Fees too.

Thankyou Chris.

Thankyou Paul.