Almost 15 years after first calling for an end to commission payments to financial planners, industry stalwart John Hewison is amazed that the debate has continued into the 21st century.

He disliked commissions from the moment he entered financial planning from the corporate world in the 1980s. They were blatant incentives dressed up as payments to reward advisers for giving their clients ongoing service. "What a nonsense that was: commissions were payments to make sure the adviser did not switch the investment somewhere else," Hewison says.

The former chairman of the Financial Planning Association is one of the most strident voices to speak out in the long-running debate on fees versus commissions. He says the issue is much deeper than commissions, which are collected by product providers such as fund managers from investors' capital, then paid to planners.

"Apart from sales commissions, there's a raft of hidden incentives directly [affecting] the costs of client investments. These include 'self-space' fees to have products included on an advisory firm's recommended list, volume incentives to encourage bias towards a product or brand, promotional or sponsorship subsidies - the list goes on.

"All these costs are included in the manufacturers' pricing but are borne by all the investors, who are directed into managed products," he says.

Hewison says the whole system of kickbacks, bribes and conflicts of interest is embedding substantial extra costs for consumers and seriously compromising the quality of advice.

Hewison is the founder of Hewison and Associates in Melbourne. It services wealthier consumers and charges fees only.

"Let me give you an example. [A woman] was entering an aged-care establishment and an adviser that was in some way attached to them advised her to put her money into a friendly society bond within a family trust.

"The adviser charged $2500 for the advice and that is fine, except that the adviser was also destined to be paid $58,000 of upfront commission. It is outrageous; how can we allow that to continue?"

In 2006, an Australian Securities and Investments Commission report found consumers were six times more likely to get bad advice if the adviser had a potential conflict of interest, such as being paid commissions.

Hewison says financial disasters such as Westpoint and Fincorp, which cost investors hundreds of millions of dollars, would have been much less likely if there had been no commission incentives for advisers to recommend them.

Westpoint and Fincorp raised funds from the public and used them for property development, often to fund the companies' own projects.

Westpoint collapsed at the end of 2005, owing about $300 million to investors. Fincorp collapsed last year. Both companies paid commissions to financial planners who put their clients - often retirees - into the high-risk investments.

Fifteen licensed financial advisers have been banned, so far, by the commission over the advice they gave on Westpoint investments.

Generous commissions paid to financial planners are also believed to have played a role in their clients being directed to stockbroking firms Opes Prime and Lift Capital, which collapsed this year.

The commission system is a very convenient one for financial planners. As the commission comes automatically out of their clients' invested capital, rather than out of their bank account, it is hardly noticed by consumers.

Hewison says: "I think a key part of all this is that in any business, including a financial planning business, their profitability and its success is their responsibility. If they are profitable because they are receiving trailing commissions then they should be profitable because their clients are prepared to pay them the same level of remuneration."

Of his own clients, Hewison says: "They know that when they come in the advice we are giving is specifically in their interests and that we have absolutely no other interests.

"And if we do not perform and if we do not provide them with the service we promise, they can fire us; they will not write out the cheque [to us]."

Hewison says there are many good planners who take commissions. But the problem is that the way most financial planning firms are structured, their employee-planners cannot opt out of the commission system.

He says young people entering the industry are typically university-educated and want to be recognised as full professionals.

"By definition, commission is a sales-oriented payment and must be seen as being biased, whether real or perceived.

"In the middle to late 1980s, financial planners just had an awful reputation as commission-grabbing sales people.

"To its great credit, the Financial Planning Association has worked very hard to lift the standards, and standards in Australia are better than anywhere else in the world. But financial planning is still tainted by this whole commission issue," Hewison says.

Some big planning groups now give clients the option of paying fees. However, the industry still gets its remuneration overwhelmingly from commissions.

The Financial Planning Association has said repeatedly that the decision as to whether to pay by fees or commissions should be left to the consumer.

The association points to its principles for managing potential conflicts of interest, including full disclosure of remuneration, which all members must follow.