Macquarie backs asset-based advice fees

During his appearance before a parliamentary committee on Friday (29 November), Macquarie Bank deputy managing director Greg Ward was quizzed about the company’s financial advice business. Specifically, he was asked if planners would meet FASEA’s educational and ethical requirements.

“We have done a lot of work in our private wealth business,” Mr Ward said. “It is a much smaller business than it was a many years ago.”

In 2013, Macquarie had 440 financial advisers. It now has 125 advisers, or “private bankers” as they are known within the group.

“Those private bankers are highly skilled, highly trained and working with typically high-net-worth clients,” Mr Ward said. “Our private bankers are on a salary and profit share system, which is based on the overall service to clients. They don’t get commission on products.”

Mr Ward, who also heads up Macquarie’s banking and financial services division, said clients typically have between $3 million and $5 million in investable assets, often much more, and as a result Macquarie’s private bankers charge a higher fee for service.

“We see hardly any complaints in that business now because of the quality of the advisers and the clients. We can have a much more intimate relationship with them, which lowers the risk of a disconnect with the client,” he said.

Asked whether he believed asset-based fees could work under FASEA’s Code of Ethics, Mr Ward said that they could, depending on the circumstances.

“Asset based fees could be compatible with the FASEA Code of Ethics,” he said. “Typically, we charge our clients a fee for service. Sometimes that is based on the size of the assets we advise on. Typically, the larger portfolio balances incur higher fees, but not always. There are occasions where an asset-based advice fee is a proxy. But we look at it as a fee for service.”

FASEA Code of Ethics Standard 3 states that planners “must not advise, refer or act in any other manner where they could have a conflict of interest or duty”.

Under ‘Other sources of variable income’, the code states that advisers will breach Standard 3 “if a disinterested person, in possession of all the facts, might reasonably conclude that the form of variable income (e.g. brokerage fees, asset based fees or commissions) could induce an adviser to act in a manner inconsistent with the best interests of the client or the other provisions of the code”.