The Australian Securities and Investments Commission (ASIC) is publicly praising financial services companies that chose to adopt “fee-for-service” models rather than commission-based methods, saying the payment method is far better for consumers.

It’s hardly the first time the commission versus fee-for-service debate has been raised within financial services. What makes it worthy of note is the fact that it’s the regulator making its views clear.

ASIC Deputy Chairman Jeremy Cooper last week praised the ANZ Bank’s decision to move away from its commission-based model previously used to pay financial planners to a fee-for-service scheme.

“Looked at from an industry-wide perspective, a move to a remuneration model where the consumer agrees to pay a clearly identified amount (whether in a lump sum or over time) for advice is a move to less conflicted, and ultimately better, advice,” he said.

Mr Cooper also commended the Financial Planning Association’s work at improving accountability and transparency on fees through its code of practice on conflicts of interest.

Describing the move as “yet further evidence of positive change in the financial planning industry”, Mr Cooper says fee-for-service models are easier for consumers to understand and require planners to “explain and justify the value of their advice in a much clearer way”.

He says such models also give consumers the opportunity to “decide for themselves how much they think the advice is worth”.

Financial services companies Axa, MLC and RetireInvest have already adopted fee-for-service models. A number of American insurance companies also took the plunge following the overhaul of the industry by New York Attorney-General Eliot Spitzer.

ASIC says the commission model has a number of deficiencies, which make it harder for consumers to understand how remuneration works and how much they are going to have to pay in the long run.