mis advisers pocketed 10pc

http://www.weeklytimesnow.com.au/article/2009/08/12/102491_latest-news.html

MIS advisers pocketed 10pc
Leslie White
August 12, 2009

UPFRONT commissions for financial advisers who recommend managed investment schemes should be banned, investors and accountants say.

Critics claim upfront fees paid by MISs created a glaring conflict of interest for financial advisers.

* Should commissions for MIS financial advisers be banned? Vote now
* Have Your Say in the form below

And advisers who recommended failed MISs to their clients should be held accountable, analysts told The Weekly Times.

The MIS sector has paid 10 per cent commissions to advisers, while the industry average is 3 per cent.

A Senate inquiry revealed this month that the vast majority of MIS recommendations came from advisers who were not registered accountants and had no university qualification in finance.

An investor who sunk $250,000 into Great Southern, Timbercorp and Barossa Vines said he was "completely disillusioned" with his accountant, who he had previously regarded as a friend.

"We had used him for 15 years and he said they (the MIS investments) were solid," the investor said.

"(Advisers) get 10 per cent commission upfront ... it's ridiculous ... once they've sold it to you, you never hear from them ever again."

Certified Practicing Accountants general manager policy and research Paul Drum said CPA supported a "fee for service" for financial advice, rather than an upfront commission.

He said ongoing fees to advisers should be based on the success of the project.

"If it's paid in instalments over the life of the project, and the project does not get to fruition, then the adviser shares some of the pain," Mr Drum said.

An agricultural consultant, who did not wish to be named, said paying a 10 per cent upfront commission was ridiculous.

But he said the real issue was the information in reports relied on by accountants which had been paid for by the MIS companies.

ASIC confirmed a taskforce was looking at MISs and would also investigate advisers who had recommended them.

Financial advice company Professional Investment Services, which lists Timbercorp, Great Southern, Barossa Vines, Gunns, Almond Investors, Orchard Funds Management and Wilmott among its "strategic partners", did not return calls.