The ANZ is set to become the first of the banks to move away from commissions to a fee-for-advice payment model for its 330 financial planners, as consumer demand for more transparent fees gains momentum.

The deputy chairman of the Australian Securities and Investments Commission (ASIC), Jeremy Cooper, welcomed the move, which follows a similar shift by AXA, MLC, RetireInvest and Financial Wisdom last year.

Cooper says fee-for-advice requires planners to justify the value of their advice in a much clearer way than before. By contrast, commissions are harder for consumers to understand, let alone work out how much they will pay in the long run. And it doesn't stop there.

ANZ's general manager of financial planning, Mike Goodall, says that by the end of a two-year phase-in period, the bank's 22,000 financial planning clients will have the choice of either fee-for-service or commission.

Under the new fee model, clients can choose the level of service they want. Proactive advice, ongoing reviews, education on economic and regulatory issues and a range of discounts on other ANZ products will be on offer.

Strictly speaking, ANZ will not follow the lawyers' and accountants' model of fee-for-service, where clients are billed by the hour. The fee will vary according to the level of service and funds under management.

Goodall says fees will range from a minimum of $1100 a year for limited service to about $5000 for a full suite of services.

All fees, including any commissions, will be agreed between client and planner and disclosed in the statement of advice as an annual amount expressed in dollars.

In an interesting move, one of the few planning groups that did charge a fee for service using an hourly rate has recently shifted to a model similar to the ANZ's.

Ian Murdoch, of independent planning group Investstone Wealth Management, says clients are reluctant to ring for advice if they think they'll be charged for every call and this makes it difficult to provide an optimum service.

Investstone now charges premium clients who want a full service somewhere between0.66 per cent and 0.88 per cent of funds under management, depending on the level of service.

"We try to touch base with clients 30 times a year, so [they] don't drift," Murdoch says.

This includes a bi-annual face-to-face review.

Those who want a one-off consultation are still billed by the hour and Investstone is also testing a performance fee for some clients.

"People like to know where they're going and what they're up for. They don't want a surprise fee they haven't budgeted for," Murdoch says.

Consumer groups have for years been agitating for a more transparent fee structure for financial advice.

Nick Coates, a senior financial services policy officer with the Australian Consumers Association, argues that consumers paying a fee for service are more likely to get ongoing holistic advice about a range of products and services tailored to their needs.

Coates says the main problem with commissions is that it is hard to identify how much they cost consumers, especially with trail commissions.

"They [trail commissions] are hidden in the MER [management expense ratio] and bundled in with a lot of other things," he says.

An additional adviser service fee is sometimes charged as well but is more clearly disclosed.

Trail commissions are an ongoing commission paid by most, but not all, product providers to planners, expressed as a percentage of your investment.

From July 1, management fees must be shown as a dollar amount in periodic statements. There will, however, be no requirement to show trail commissions.

Many consumers are unaware they are paying a trail, which continues even if you fire your adviser. Worse, they create a conflict of interest for planners whose loyalty may lie more with the product provider paying the fee than their clients.

The Financial Planning Association stops short of recommending fee-for-service as its preferred remuneration method. It did, however, recently release a draft set of principles governing conflicts of interest.

These include the separation of advice, administration and product fees and the disclosure of any fees deducted from products. They also call for an end to the practice of rewarding advisers who recommend in-house products.

Goodall says trail fees can be rebated or stopped on most financial products these days. For example, Investstone rebates all commissions by cheque at the end of the year.

"It's still a challenge in life insurance but most products allow it and two or three life insurance companies do offer that flexibility. Some legacy products are also a challenge," Goodall says.

"Legacy" products include managed funds that have been superseded and closed to new business.

One of the financial planning industry's arguments against fee-for-service is that it will prevent low-income earners seeking advice. Coates says they're being denied access anyway.

For example, Investstone accepts clients with smaller amounts to invest, but a minimum fee of about $3700 to open the books and for administration would deter low-income earners.

When the Australian Consumers Association's magazine Choice ran a shadow-shopping exercise a few years ago, it discovered most planners wouldn't touch shadow shoppers unless they had $150,000 or more to invest.

"There is an implicit calculation - the more you have to invest, the higher the trail commissions. The average trail of 0.88 per cent doesn't sound like much but over 20 years it is a significant amount," Coates says.

"Consumers need to know in dollar terms how much they cost in one or 20 years."

Goodall says that fee-for-service works best with clients who have more than $100,000 to invest: "At the moment we are looking for a low-cost solution for small investors and those with simple needs.

"This hasn't been addressed adequately anywhere in the world, to my knowledge, but we are looking for a solution."