If “I” wish to offer advice,“I” am in conflict with me, with you and with the system – CSA Mutual Fund Fees discussion paper!

If I am only paid by the transaction, then I should only wish to offer the transaction. I am not paid to offer advice that is in your best interests, although I may offer such “incidentally”. What may be in your best interests may be no transaction at all, and even considering such an option, is a waste of my time.

If I am paid by the transaction, there is little sense in investing in thought (sorry!), let alone processes that focus on advice of the whole. This is advice for which I derive no direct remuneration, and which will slow down my transaction driven return.

It does make sense for me to know my product, but since my aim is the transaction, I may need to be economical with the truth; I am not obliged to cut my own throat.

I will only invest in processes, innovation and communication that will facilitate transaction remuneration. The imperative is the transaction return and not your best interests, because the two are in conflict. If I earn my return from the transaction, the competitive market outcome, from my perspective, is the transaction return. But you might ultimately find that neither the advice nor the transaction was in your best interests.  You would not have a competitive market outcome.

I am in conflict with your best interests, but not with mine or the system’s.

But what fortune to have a transaction focussed suitability process that allows me to focus on the transaction without responsibility for the whole, that burdens you with responsibility for the decision, and that allows me to pretend that I am advising on the whole. I can be economical with the truth.

But what if I wanted to offer advice that focussed on the whole, that would necessarily, to greater or lesser extent, lead to transactions? I would need to focus my effort on the whole. I would need to earn a return for this effort and be rewarded for my investment in the process. I could not rely on the transaction return: I am in conflict with me, with you and with the system.

Allowing me to charge for my services rather than the transaction will force me to invest in services, processes and skills that focus on advice. I will be forced to align my processes with your interests. Our competitive market outcomes will match, since this is my new imperative.

I am no longer in conflict with you, or me or the system.

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