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Disclosure consultation and commission

Incentive trips are not, it turns out, the sole preserve of insurance advisers.

Wednesday, May 16th 2018, 10:00AM

by Russell Hutchinson

You might be surprised to know that the otherwise quiet and staid world of accounting also enjoys incentive travel – and it wasn’t disclosed to me either, in any of my recent dealings with my accountant.

The travel was awarded by a software provider to the accounting firm. I do not know how this is linked to the promotion of the software company’s online platform for accounts, but I do know that they probably didn’t award any trips to accountants that didn’t promote their software, or preferred to promote the software of one of their competitors.

But I don’t care.

I considered the software subscription to be a reasonable cost and paid it. I know that people get paid commissions, fees, and sometimes get taken out to lunch, or even shouted overseas trips. It’s business, and business does these things.

There is a famous witness stand speech in the movie “A few good men”, which has become a sales meme. If you haven’t already googled it, do so.

But I’m also not arguing against proposed new disclosure rules – I quite like them - this is about change.

Times change, and both consumers and the products and services they are sold are far more sophisticated these days than they once were.

In the 1950s you were doing well to have a reliable car. Today, consumers are concerned about carbon use, the possible inequity of bargaining approaches in dealerships, and the treatment of workers all the way through the value chain. Or they are worried about whether the engine was hand-built, the leather is full grain, and which parts are magnesium-alloy. Details count, far more than they used to.

There is a long-running consumer trend that demands more information about products, and how they are made, and who gains from that, and so on. As the recent MBIE consultation document on disclosure made clear, we should make clear to consumers, what we make from them, and who makes it. It is time to embrace change and improve disclosure.

But it is also worth remembering that the sky, probably, won’t fall in.

Consumers are also far more accepting of the fact that you need to make money. At the start of the review of the Financial Advisers Act MBIE also published some consumer research that shows consumers are generally well aware of commissions, and quite like them as an approach for paying for services. Which is why MBIE and our legislators rejected the idea of banning commissions (see second reference below, end of the report ‘Options considered but rejected’).

Who knows, maybe my accountant will improve their disclosure too, and probably last of all, doctors might catch up.

Submissions on the draft disclosure regulations close at 5pm on Friday 25 May. A couple of useful reference links are included below. If you want to have your say, click on the first link below.

References:

Have your say: Consultation on disclosure requirements

Final report: Review of the operation of the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008
 

Tags: Disclosure MoBIE

« Scope versus adviceQuestions of Conduct: when does good conduct become financial advice? »

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