Appearing before the royal commission, ASIC deputy chair Peter Kell has admitted ASIC should have given more thought to the consequences of the grandfathering provisions.
“Leaving aside the legal side, grandfathering – the entire provision – is not in the interests of consumers,” Mr Kell said, responding to a question from counsel assisting Michael Hodge.
“The Parliament has in effect put in place a provision that enables the continuing payment of commission that generate conflicts of interest and unnecessary costs widely across the financial system.
“It was depicted as a transition issue of a relatively modest or limited nature.
“It’s actually an extremely expansive provision both in terms of the circumstances under which grandfathering may continue and the time period over which it may continue into the future.
“We can and should look at individual cases, but I think in the interest of consumers as a whole, it would be highly desirable to have this dealt with at a policy level.”
You can follow the action on a live blog at ifa’s sister title, InvestorDaily: https://www.investordaily.com.au/superannuation/43410-royal-commission-superannuation-hearings
Market penetration of financial advice on the bottom 80% of households as measured by wealth has nosedived since 2013.
This will most certainly put financial advice to those that need it further out of reach.
Have a look at the “legal profession” The only people who can afford advice are the rich. The poor either get LegalAid (Financial counseling) or have to take a no win no fee proposition where they lose 35% of the winnings anyway & the only cases taken are those that look like certain winners.
Commissions (no matter what argument you have against them) open up advice to the mass market, & god knows they need it.
i don’t see the lawyers complaining about the fees they can charge. those advisers who stay and can complete the educational requirements will be able to charge what they like, and for me that is going to be commensurate with my education and experience and in line with other professions as one would expect it to be so
i am a professional, i charge professional fees, i am not a charity. if the outcome from these reforms is that most Australians cannot afford to get my advice then perhaps the policy setting needs to change, and by that i mean financial advice should become tax deductible, as it is with tax agent’s fees where even the most ordinary of Australians can and does get their taxes completed by a professional. some 82% to be precise
I have met with clients who have been left crippled by lawyers charging for simply sending letters over and over again. I’m not discounting what you’re saying, but I don’t want my profession to go down the path of inventing fees like ‘perusing emails’, ‘replying to emails’,’scanning your documents’. I understand lawyers had to provide this level of transparency, but I wouldn’t want to adopt that approach. The fee I charge is for my knowledge and strategies provided, not simply what administration time was spent.
I’m all for charging professional fees, I just want to average people still be able to access advice services as I know first hand the difference that it makes.
One must ask whether Kell and his cronies remain competent to comment on matters like this.
The Royal Commission shone a harsh light on their failure to act, and their subservience to the big banks and the AMP. It should be renamed the “Royal Commission into ASIC passivity and subservience to large financial institutions”.
Tim Mullaly’s evidence last Friday confirms this: he watched, impotent, from the side lines whiles hundreds of unqualified bank staff gave unwitting customers personal advice on under-performing super products, dragging in billions of extra FUM, hundreds of millions of extra management fees and at least half a billion each of extra market capitalisation for each of the ANZ and the CBA.
Non-bank advisers, ie the readers of this magazine, doing the same thing would face large fines, gaol time and a cruel name and shame campaign.
Each bank was fined about $1,000,000 (less than one day’s net profit from managing the FUM) and one was given 45 days grace (ie extra selling days) to “change it systems”. Haynes nearly fell off his throne.
Mullaly then congratulated himself for acting in a timely fashion (evidently four years is pretty quick) and for “finally getting the bank’s attention” (when the head solicitor finally gave him ring, after four years…).
When will the ASIC dismissals start?
Yep. Hundreds of bank tellers break the law and no one gets banned. Their employers wrote an EU that says ‘we promise not to break the law from now on. At least not this one.’
Then the bank gets back to work and ASIC gets back to closing groups like Dover, putting hundreds of proper advisers who never sold super illegally out on the street.
And Kell reckons parliament is the problem.
Not to mention Mullaly saying ASIC did not require remediation (!), penalties(!!) or even a computation of what the total cost to consumers was. (!!!).
And it sounds like the CBA and the ANZ set their own penalties and drafted most of their own EU.
Compare this to what happened when ASIC shit down Dover.
Two sets of rules.
Amazing that the EUs haven’t come thick and fast and none have been asked to close their doors. Oops, let’s pick out Terry who has always never charged a dead person or accepted any FUM based income and throw him under a bus. Us advisers were then asked to scramble to new AFSLs which simply can’t hold a candle to the level of support and professionalism which Dover provided.
bring back dover!!!
A lot of advisers (myself included) were trying to get out of Dover before the collapse. I have found a new group which I found and agreed to join just days before the collapse and they are superior to Dover in almost every way.
Yeah that’s great Andrew but what’s that got to do with Kell’s misguided comments about grandfathering? I just hope that your new group doesn’t do a ‘Dover’ especially now that ASIC are looking for more (small) scalps….not the big boys mind you……they have deeper pockets.
I read a lot of the venom here and I don’t think you guys get it. The profession has failed to manage itself. It has allowed the public and its clients to be belted with fees. Its a classic case of regulatory failure, at all levels. To restore credibility and public trust, blood, sweat and tears will be needed. Yes, ASIC has been asleep at the wheel, but it doesn’t excuse the financial planning profession from its utter inability to manage its own affairs.
The FPA and all the other bodies have failed us as well. They tried but could not rein the excesses of the few.
As for Bank financial planners. They have been utterly trashed. ASIC made life so hard that the independent small players sold out to the banks, who have laughed at the law, laughed at the regulators, laughed at the profession and laughed at the public. ASIC’s credibility is in tatters; just wait until it fails to criminally prosecute AMP and the banks; its future is on the line.
When a high profile adviser gets utterly destroyed on the witness stand, you have to accept the issues are deep seated, systemic and require a complete overhaul. And that means planners are going to get very badly hurt…and no-one outside the profession give two hoots what we think.
you are right on all accounts. the sore point for me is that most advisers think we haven’t got a problem in the industry and we don’t need higher education standards and standards at all
people continue to be members of the FPA and AFA. i just don’t get it why are you still members of the FPA and AFA they are the most useless organisations
Agree 100% with that one Steve…. and I’m the first to say you’re a nut but well said. Advisers need to take a good hard look at things they can control themselves. Advice was borne from the need to distribute product and advice has been used to sell those products but we need to move on. Things we can control are our education levels, the way they charge and deal with clients, the firms they chose to be licensed by. I’d personally like the FPA to end it’s association with product manufacturers (I have nothing against AMP advisers) it’s just the perceived conflict of interest. I see it as an easy move to prevent further regulation and with a Labour Government coming in next year we need to get on the front foot now.
My issue with what you have said (and we’re a self licensed IFA with very little gf comm so this change doesn’t hurt our business as much as it would the few clients that are in these particular products for very good reasons), is that it is the institutions and product providers overall who are the majority of the miscreants with the recalcitrant attitude, and yet the consequence yet again flow down to the planner level. Just like it seems we were to blame for the GFC, if the regulations and legislative change since then are anything to go by.
[b]Why is there not legislation and changed regulations applied specifically at the product manufacturer and provider level to keep them as accountable as the individual adviser?[/b]
This of course would encompass[b] all[/b] product providers; banks, insto’s, fund managers and must also include ISA.
[quote=Birmie]This is a contractual commitment between the Adviser and the Trustee of the Fund to pay at a certain rate and should not be white anted by Government. Besides any renegotiation would in my case raise the rates for the Consumer ![/quote]
How would it raise the price to the consumer? The client is already paying for it through the product. Do you think the $ magically comes from nowhere. Chances are if you’re with a dealer group they are also keeping some of the rebate. Put the client into a cheaper product without a rebate, actually offer them a decent service and charge correctly for it and you will find that you and the client are better off. Get off the rebate gravy train.
Birmie, agree generally but what about situations that we take over of old products with in built commissions and there is a very nasty exist fee, CGT issues, grandfathered Centrelink benefits, etc.
Time for the government to provide a solution to these locked up problems if they want to get rid of commissions.
And don’t for a second think the Institutions / Banks won’t simply pocket the adviser commission as extra margin once commission payments are stopped to advisers and then clients still pay comms and have to then pay more if they want advice too.
Well said, the call for ‘banning grandfathered comm’ is simplistic and it is naive and almost negligently idiotic for public figures (as well as readers on here) to blindly chant that mantra without thought to the actual full consequences for [u]all[/u] clients. We have hardly any in our business but the ones that do have it are still in those products for very valid reasons, with all other implications definitely not in their best interests.
You said it but can you do it? The fact that you say “how would it raise the price to the consumer” indicates you do not fully understand the issues – just the headlines.
Get rid of it! Everyone who defends it is conflicted! Advisers don’t switch clients out of the product that pays the rebate because they will lose it. That is the definition of conflicted. For those businesses who depend on it – they have a bad business model to begin with. If the Royal Commission is serious this should go immediately- not in 3 years…now! And yes I own several business…
Correct. Many feel they can manage the conflicts which is fine, but many dont. As you say, anyone reliant on grandfathering needs to bring their business model out of the dark ages.
This is a contractual commitment between the Adviser and the Trustee of the Fund to pay at a certain rate and should not be white anted by Government. Besides any renegotiation would in my case raise the rates for the Consumer !
This contractual commitment was challenged in the first instance by FOFA (hence grandfathering), and is now being directly challenged again by the Royal Commission.
Social expectations are changing, and contracts can be broken or re-negotiated. Good luck trying to save this one, it seems you will have very limited company.
Does this not bring into question the relevance and competance of both Kell and ASIC?
Fair go 😆
Kell & ASIC were too busy off supporting CPA’s Adviser business and launch to worry about doing their job.
Kell smells, he’s gotta go. Biased, inept and corrupt is my opinion on his approach to doing his duty evenly and fairly.
How can this be allowed to happen when advisers have bought books of business based on that ongoing servicing fee??? This will destroy people’s livelihoods for no other reason than political bias.
oh my god they are going to slaughter us
This has been on the books for the last number of years, he same thing is now happening to the Mortgage industry with their trails, they will be lost.
This means that the banks will call in loans (taken against the purchase of a business as the asset will not exist anymore) and businesses will be bankrupt.
unfortunately, a lot of advisers and mortgage brokers have depended on this trail income to support a lavish lifestyle which will now end.
Fee for service is the only way ahead, and those with existing loans for books of business, i would start to renegotiate with the banks as they will require personal assets against the loan.
A changing dynamic.
These dudes are so totally out of step with our industry its actually criminal. They get away with making grand statements on GF Coms without ANY of them (including Odwyer) or their advisers actually spending anytime in running a FP business, in my case 38 years. As far as GF Coms are concerned my clients do and always have come back to me for any assistance they may require without me EVER charging them. I am paid to look after my clients on an ongoing basis post new business and that’s what i do and have always done. Why don’t the FPA and AFA help these people to understand the real world ?
Hi have spent 38 years trying to build up the value of my business just to have that value removed at the stroke of a pen by Politicians and Academics who have no idea just how difficult, stressfull and family destroying it has been to try and survive. Quite honestly if I lose that 38 years of work I will no longer be on this planet, Dramatic ? sure is Regards Chris.
That was just a dumb business decision. If you have more clients that you can valuably service that is your faulty business model. If you service those clients, they will pay a fee and resign every 2 years.
This has been coming for a long time and only the lowest common denominator of advisers are still heavily reliant on grandfathered income.
It would really be great if people actually put their own names against their posts and not hide behind Anonymous….
this is an anonymous forum we don’t need to post our names. stop saying that. if you want to post your name that is fine. don’t ask others to do the same. there are many legitimate reasons why i don’t post my name, my posts may offend many in the industry, my dealer group etc as what i state may be the future and not to the liking of those who don’t want to change
Agreed.
Yep right on ASIC, get rid of grandfathered commissions, let the banks and insurance companies pocket the advisers commissions as extra margin, then set up the financial advisers to have to charge the clients more to try to get paid for the advice they provide.
Admittedly there are advisers they don’t provide much advice for the comms received and that was stupid with FOFA.
But for everyone’s sake, ASIC & ODwyer can’t be allowed to let the banks and institutions pockets these Adviser comms as extra margins.
ODwyer & ASIC you need to be put on notice of your bank loving approach and anti financial adviser constant approach.
Let’s just make everything free – all financial services should be free. Let’s raise taxes to a flat 50% so the government can provide for all. 🙄
Derp, this should have have happened when FOFA came in.
ASIC doesn’t under how the industry works. They are have no idea what they are doing.
They make the keystone cops look like they have a sound investigative process.
Well ASIC, do you also admit that “ASIC should have given more thought to the consequences of”… LIF and the engineered 413 report?
OR, “given more thought to …..” ethical Advisers who tried in vain to alert you to : 1) Storm, 2) CBA Financial Planning Scandal, 3) Great Southern, 4) …….. We could keep going on forever. PATHETIC AND BIASED!
Agree with Kell, better late then never. We will never be recognised as a profession if this continues.
Next ban commissions on insurnance.
Next deal with Property as it falls outside Corp’s law and subject to abuse.
All we need now is a share market correction and property correction (under way) to bring the bacon home.
LOL… love this RC
fee for service all the way, high barrier to entry oh my god they are going to slaughter existing advisers
How will banning grandfathered commissions make us a profession ? The misguided quest to justify everything in the name of becoming a profession misses a key point. To be a professional you need to act like one not expect the title to prove your status. Start by focusing on your individual behaviour and your own practise behaviour.
Obviously a lefty troll on our forum?
Welcome to what we all knew years ago, Kell. Asleep at the wheel as usual.
My impression of Kell is he himself is morally bankrupt and conflicted. How can he persecute FPs for previously contracted income with a supplier, not the clients, and yet let all the dodgy dealings with ISA go on without investigation?
We are an IFA with negligible grandfathered comm btw so minimal self interest in writing this, but sick of this snivelling hypocrite.
Stating that the entire provision of grandfathering is not at all in the consumers interests is a wreckless statement by an organisation that has lost its way. Once again the advisers will suffer from poor structured products that should never have been approved by ASIC in the first place.
of course… wasn’t this the whole purpose of the RC? Now ASIC should add that if grandfathered commissions be removed that the product providers actually rebate the commission back into their accounts (and not be retained by the institution). Also.. perhaps ASIC in their wisdom should look at how advice costs can be simplified and reduced so that the process to transition clients can happen faster – the advice costs and red tape need to be considered.
Finally.. let’s not let the consumer off the hook… I thought that they could actually take the lead, engage with a financial planner (or direct with a super fund/product provider) and ask for a non commission based product solution. The thing about consumerism is that it is everyone else’s fault and taking responsibility for their own actions is their last thought.. I think the banks are actually laughing in their boardroom!! Goodluck to those retiring planners.. a few shock waves I’d imagine
And anyone is surprised? I recall predicting the end of the dinosaurs a few months ago with the asteroid in the shape of the royal commission bearing down. Let’s just say I copped a fair old spray. Adios lifers, your extinction event will probably be September 22 ? Is that the day commissioner Hayne hands down his interim report ? Sorry. The old ways are over.
And the job of providing life insurance will be left to the likes of you , who have no real interest in the serious hard work required to implement and service said insurance.