It's great to see financial advisers' trailing commissions will be removed. Even discount fund managers enjoyed this "money for jam" while giving investors a reduced upfront fee. However, if you invest directly with the fund manager, they also take trailing commissions (a salve/concession to the financial advisers in the past). Will this also be removed? M.N.

As I understand it, all commissions will eventually be removed and one can assume this change will also remove entry fees and trail commission paid to the fund manager. However, as the saying goes, you should perhaps be careful what you wish for.

As I disclose in every column, I am a financial planner. Given that bias, I'd argue many would agree people need advisers because good advice makes money for them, or at least helps them accumulate more wealth than otherwise.

ASIC won't let anyone give advice without an ASIC licence and demands that licensees pay Government fees, join complaints services, buy indemnity insurance and undertake prior and ongoing education. The CBA, in its submission to the current parliamentary inquiry, quoted an estimated cost of $3750 to create a financial plan. I suspect a small firm could do it for $2000-$3000.

The ABS reports the average adult earns about $64,000. In 2007, the average retirement payout was about $110,000 for men and $45,000 for women, or $90,000 per person, but statistics distort and 70 per cent or more of people retire with less than the average. In other words, the majority of people needing advice can't, and will not want to, pay up front the sort of amounts advisers require to cover their costs, plus a profit.

ASIC's submission to the parliamentary inquiry noted that fee for service covers about 16 per cent of adviser income, which means about 84 per cent comes from commissions. I suspect upfront or entry commission is a very small proportion of this as most advisers rebate most if not all entry fees these days. For example, the CBA subsidiary Colonial First State reports its largest inflow is into its wholesale fund, with no entry or exit fee and no commission, only an adviser fee agreed to by the client.

So the concept of paying a flat upfront fee, as you do when visiting a doctor or lawyer, is unlikely to dominate as the fee will need to be above $2000-$3000 and, as with lawyers, you'll find yourself paying for photocopies, postage, talking on the phone and so on. Clients are most likely to end up paying a percentage of assets for ongoing advice and will have difficulty finding an adviser willing to offer a one-off advice service, other than salaried advisers employed by the large fund managers such as banks and insurance companies. A recent Sydney Morning Herald

article estimated 73 per cent of money crossing their desks ends up in the employer's products, so while they receive salary and not commission, their income is linked to product placement anyway.

I suspect the end result will be fewer independently owned advisers offering more expensive advice.

Retirement system not working

In 1995, having retired at age 72, I applied for a part-pension. When listing our income and assets we detailed a strata-titled office we owned, which after paying interest and outgoings had a negative income that Centrelink would not allow to be deducted from income in calculating our pension. This financial year will see us receiving a small positive income, which in subsequent years will increase so we are looking to Centrelink to ignore the income from the property in calculating our pension until we have used the income they disallowed. Are there any rules about this and if not how should we present our argument to Centrelink? R.C.

Centrelink will count the income from your investments and quite rightly so. It is handing out taxpayer's money, including my money, so when people choose to invest in a property instead of supporting themselves, there is no reason for taxpayer's money to support them.

Australia's retirement system was badly let down by the Government over the last century. Individuals were expected to voluntarily fund their own retirement. The system has clearly not worked. More than 75 per cent of retirees are now claiming the unfunded pension. The sooner the compulsory super savings rate is moved from 9 per cent to 15 per cent, the minimum level at which most agree we can achieve a reasonable level of retirement savings, the more equitable our system will be.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Helplines: bank ombudsman 1300 780 808; pensions 13 28 00.