The Federal Treasury has weighed into the fee versus commissions debate for financial planners.

In a submission to the Parliamentary joint committee inquiry into financial products and services, Treasury acknowledges that a legislative ban on certain fees and commissions would eliminate conflicts of interest that affect the quality of advice.

But the department says this change would also affect product strategies and business and adviser remuneration, with fee-for-service currently making up just 16% of adviser pay.

It could also limit the number of investors able to pay for advice, lead to more compliance costs and new systems, and further consolidate the industry.

“The requirement for a fee-only structure could contract the advice market and this contraction may fall largely on less affluent clients who are unable to pay upfront fees,” the submission said.

“It may be worth allowing some time for industry to implement such a move and further explore the implications of taking legislative action.”