The move away from commissions in the financial services sector will improve transparency for consumers, according to Financial Services Minister Chris Bowen.

Speaking at the Financial Planning Association’s (FPA) national conference on Thursday, he commended the FPA for announcing that its members would stop receiving commissions for advice and move to a fee-based structure from July 2012.

He says a switch to fees will help ensure clients receive advice that is free from conflict of interest concerns.

“The move away from commissions will improve transparency for consumers and will help to ensure that your clients receive advice which is free from any conflict of interest, whether real or perceived” he said. “Crucially, it will also boost the longer-term image of the financial planning industry.”

Overseas agencies are also taking steps to increase transparency in fees and charges and remove or minimise conflicts of interest, he says.

“[Commissions] invariably create an overwhelming perception of conflict, a perception that financial advice may be self-serving or not in the best interests of the client.”

Mr Bowen says the majority of planners give advice they believe is in the best interest of their client.

“But the events of the last year have heightened the perception that conflicts of interest lead to inferior financial advice… commissions paid to financial advisers have the potential to create real, potential or perceived conflicts of interest. Such a perception justifiably puts doubt in the minds of many consumers, ultimately to the detriment of the industry.”

Mr Bowen says this perception of conflicts of interest is not helped by the fact high-profile firms such as Westpoint, Timbercorp and Great Southern paid commissions to financial advisers.