Under the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019, grandfathered commissions will be banned from 1 January 2021 and product issuers will be required to rebate the amounts to consumers
In an update to members, AFA chief executive Philip Kewin expressed his dissatisfaction with the government’s “lack of due process” on the issue.
“We recognise grandfathering does not impact all advisers and indeed many see it as a blight on our industry that needs to be removed. We also recognise that banning grandfathered conflicted remuneration will remove another of the layers of opaqueness that fuels negative perceptions of financial advice,” Mr Kewin said.
“However, the outcome will be devastating for some advisers, particularly those, who in good faith borrowed money to kick start or grow their client base, and now will not have time to review their clients whilst trying to maintain an income to repay a loan on an asset that now has no value.”
Mr Kewin continued by saying that, regardless of your personal stance on grandfathering, the result in the short term will be devastating for some advisers and their businesses, and called on members to “spare a thought for those colleagues”.
“They have acted in good faith and within the law and while many will adapt and survive, for others it will turn their lives upside down, if it hasn’t already done so,” he said.
Further, Mr Kewin said the bigger consequence will be “the hundreds and thousands of clients who will now be unable to access affordable financial advice”.
“In many cases it will just not be viable for the adviser to undertake a review and convert a client to a fee-for-service arrangement,” he said.
“Many thousands of clients will now be left without an adviser, so the next phone call when they receive a letter from Centrelink, or want simple information, will have to go to the institution that is providing the product.
“And the answer in most cases will be we don’t deal in that information, or ‘sorry, we can’t give advice’.”
[quote=Agent 86][quote=Anon]I feel for people that have bought books, but seriously the writing has been on the wall since FOFA first came in.[/quote][quote=Anon]I feel for people that have bought books, but seriously the writing has been on the wall since FOFA first came in.[/quote]
Totally and utterly incorrect on every level.
The writing was not on the wall as it was clearly determined in the lead up to FOFA that the adviser had a contractual right to that remuneration and the advice Bill Shorten was provided by the Australian Govt Solicitor in relation to whether this should be quarantined from FOFA was because it was determined that if this were to occur it would present a real issue regarding Paragraph 51 of the Constitution.
The Govt consequently excluded grandfathered commissions from the FOFA legislation based on high level Constitutional legal advice.
This legislation to remove the grandfathered commissions when a precedent to retain them on legal grounds has already been established and a decision made is the instigation of legislation designed specifically to remove constitutional rights from advisers.
The only writing on the wall is the writing that stated from the commencement of FOFA, no further commissions would be able to be levied on new business and that existing business was exempt from that ban for all the reasons stated.
It is now simply convenience that some advisers of whom none would be significantly affected by this unacceptable position now can claim that the legal parameters that were put in place were only ever temporary and everyone should have known it would change.
Well, if those advisers and commentators are so very intelligent I can only assume they also moved every cent of client investment monies to cash 2 weeks before the GFC and they also know exactly when the market will either slump or shoot the lights out.
In the end, it will be a vast number of clients who will be worse off and what has that really achieved other than politically expediency based on a total lack of accurate analysis and impact assessment prior to the decision being made.
The treatment of financial advisers who have provided advice and assistance to many clients over many years at a reasonable cost has been appalling.
[/quote][quote=Agent 86][quote=Anon]I feel for people that have bought books, but seriously the writing has been on the wall since FOFA first came in.[/quote][quote=Anon]I feel for people that have bought books, but seriously the writing has been on the wall since FOFA first came in.[/quote]
Totally and utterly incorrect on every level.
The writing was not on the wall as it was clearly determined in the lead up to FOFA that the adviser had a contractual right to that remuneration and the advice Bill Shorten was provided by the Australian Govt Solicitor in relation to whether this should be quarantined from FOFA was because it was determined that if this were to occur it would present a real issue regarding Paragraph 51 of the Constitution.
The Govt consequently excluded grandfathered commissions from the FOFA legislation based on high level Constitutional legal advice.
This legislation to remove the grandfathered commissions when a precedent to retain them on legal grounds has already been established and a decision made is the instigation of legislation designed specifically to remove constitutional rights from advisers.
The only writing on the wall is the writing that stated from the commencement of FOFA, no further commissions would be able to be levied on new business and that existing business was exempt from that ban for all the reasons stated.
It is now simply convenience that some advisers of whom none would be significantly affected by this unacceptable position now can claim that the legal parameters that were put in place were only ever temporary and everyone should have known it would change.
Well, if those advisers and commentators are so very intelligent I can only assume they also moved every cent of client investment monies to cash 2 weeks before the GFC and they also know exactly when the market will either slump or shoot the lights out.
In the end, it will be a vast number of clients who will be worse off and what has that really achieved other than politically expediency based on a total lack of accurate analysis and impact assessment prior to the decision being made.
The treatment of financial advisers who have provided advice and assistance to many clients over many years at a reasonable cost has been appalling.
[/quote] I can only hope you are one the advisers that are choosing to exit the industry over the next few years. Quoting the constitution to try and justify retaining lazy, conflicted revenues is simply laughable. Time to join the other dinosaurs..
You’re an idiot anonymous. At the end of the day commissions were there in black and white when a client signed up for a product. They should be receiving service for it in my opinion but there was never any legislative requirement for it. Same way my knob mortgage broker gets 0.1% of my mortgage balance and I never hear from him.
To have no compassion for your fellow advisers who may be in dire financial distress because of this makes you the biggest cretin of all.
I wish for my accidental agreeance on this post to be removed. I disagree with this post vehemently.
As far fetched as this must sound, I am seriously beginning to wonder if there’s some secret ‘Illuminati-type’ group that exists that’s being run between senior heads of Government and the banking system.
You simply couldn’t script how no matter what the banks do to the public (and its own hard-working staff from personal experience), any legislative changes made under the guise of improvements for Australian consumers, seem to always end up favouring the banks and massively impacting the small adviser industry which in general, provides great service and advice.
How can this stuff keep impacting advisers like this without common sense intervening at some point?
Have politicians not heard about the decimation they’re inflicting on the financial services industry?
Lives lost, businesses broken or sent bankrupt, insurance company new business inflows down 30% across the industry; a mass exodus of advisers (down 20-25% I’m reading), uncommon insurance premium increases over the last 2 (maybe 3 years) since adviser remuneration levels were capped and reduced which should have triggered discounting – and now Grandfathered Remuneration made illegal…will it end?
Yet somehow, the big institutions come out with the market back in their favour, every time. Seriously, I just don’t get it.
To Anon, re: comments on ARC. I don’t receive any GF revenue (though wish to donate) though I am scared as hell the retribution following donating to the fund from industry bodies, ASIC etc. I think you would find that many other planners are in the same boat which is why the uptake has been so small…
[quote=Anon]I feel for people that have bought books, but seriously the writing has been on the wall since FOFA first came in.[/quote][quote=Anon]I feel for people that have bought books, but seriously the writing has been on the wall since FOFA first came in.[/quote]
Totally and utterly incorrect on every level.
The writing was not on the wall as it was clearly determined in the lead up to FOFA that the adviser had a contractual right to that remuneration and the advice Bill Shorten was provided by the Australian Govt Solicitor in relation to whether this should be quarantined from FOFA was because it was determined that if this were to occur it would present a real issue regarding Paragraph 51 of the Constitution.
The Govt consequently excluded grandfathered commissions from the FOFA legislation based on high level Constitutional legal advice.
This legislation to remove the grandfathered commissions when a precedent to retain them on legal grounds has already been established and a decision made is the instigation of legislation designed specifically to remove constitutional rights from advisers.
The only writing on the wall is the writing that stated from the commencement of FOFA, no further commissions would be able to be levied on new business and that existing business was exempt from that ban for all the reasons stated.
It is now simply convenience that some advisers of whom none would be significantly affected by this unacceptable position now can claim that the legal parameters that were put in place were only ever temporary and everyone should have known it would change.
Well, if those advisers and commentators are so very intelligent I can only assume they also moved every cent of client investment monies to cash 2 weeks before the GFC and they also know exactly when the market will either slump or shoot the lights out.
In the end, it will be a vast number of clients who will be worse off and what has that really achieved other than politically expediency based on a total lack of accurate analysis and impact assessment prior to the decision being made.
The treatment of financial advisers who have provided advice and assistance to many clients over many years at a reasonable cost has been appalling.
My senses tell me this may be a trick. What we do know is that the FPA is currently meeting with AMP and CBA to determine their position. Once these carcinogenic Dark Sith Overlords have a position they will instruct Darth Vader (Dante) to issue a press release (ultimately in support of their cause). The Rebel Alliance is strong, will continue to fight this intervention and is concerned about the amount of Government regulation and lack of affordability of advice and encourages all to turn away from the dark side that are this crummy associations. Don’t be fooled into thinking they act for you.
The trailing commission is a contractual agreement between the fund manager and the adviser. The basis of the agreement when the adviser introduced the client to the fund manager is the payment for ongoing personalised service to the adviser which supports their business costs given they do not receive a salary from the fund manager . The client has the option to close down the investment if the fund manager is not performing and/or if there is no value from the advice relationship. That should be up to the client or customer to decide NOT a third party who is not involved in the relationship but has formed an opinion on whether that arrangement is appropriate. The establishment of a new agreement with the client on a fee for service basis is a separate issue. Once again, that is up to the two parties agree NOT a third party to decide. And any adviser that needs the removal of trailing commission from someone else’s clients to justify themselves as a professional needs to take a good hard look at themselves and the service they provide.
I feel for people that have bought books, but seriously the writing has been on the wall since FOFA first came in.
Hey!
All these clients and advisers vote at the next election. The advisers can join the AIOFP action to take the govt to the High Court in a challenge. it is the only recourse now left open to them to retrieve their income and assets. Get on board or live with the consequences of the govt taking an asset via legislation so watch out mortgage brokers – you are next in line.
How does this look to the public when one of the key industry bodies representing advisers comes out and says it’s ‘devastating’ advisers can no longer earn conflicted, unearned revenue at the expense of clients? You would think the industry might consider thinking about its reputation a bit more and how it’s perceived by the public. Last I checked advisers are almost neck and neck with used car salesmen in terms of trustworthiness. Way to go..
You only have to see the incredible job the mortgage broker industry bodies did to see how woefully inept our bodies are. [/quote]
you have to give the mortgage brokers a lot of credit. my god, their whole industry are united as one. setting aside their differences to fight. they will see to it that none of hayne’s recommendations are implemented. and are ticking it off one by one. god bless them they are taking it to them.
they are on the front foot as a best interest duty definition is being contemplated and are getting involved to define exactly what that is.
we are in such a mess exactly because we didn’t do what they did. imagine if we had done what they did.
the fpa and afa are just killing us.
[quote=Wayne]Choice subscriptions should be subject to annual opt in. Their practice is to automatically renew subscriptions unless you opt out. Why the double standard?[/quote]
make a complaint to the accc. not fair.
we need to attack this stupid organisation.
[quote=Bruce Lee]IT IS HIGH TIME THE AFA AND FPA SHOULD MERGE, WE NEED ONE VOICE (needed it some years ago) AND A GRIP ON OUR FUTURES[/quote]
nah, and lose their ceo job and salary and perks for your and the professions benefit. nah, i don’t think so.
[quote=anonymous]And yet the industry sits on their hands. The ARC high court challenge has had no more than 400 people participate. Whether or not you believe in, or even receive GR (for the record: I don’t have any GR and support addressing the problems it creates) , this was the one chance to stand up to the endless government oppression of our profession. This is far bigger than GR. And the response? Weak. A win in the high court or a vigorous challenge sets a precedent and will encourage these shameless amd expedient beauracrats to think twice before waving their regulatory wands in the future and nuking honest people’s lives .
well said. I am with you. i have been calling on this as you have with fellow advisers for months and months. i haven’t had much luck unfortunately. they all somehow think that sitting on their butts and posting on this forum helps. it doesn’t help.
i get it, unless it hits their bottom line, salaries, job losses, and they are deeply and personally impacted as a consequence, nothing gonna change.
it’s time for payback, and to inflict pain on those from whom we have tolerated for so long.
Opt in isn’t an option, the relationship on fees is between the client and fund manager, the relationship on commission is between fund manager and adviser.
reviewing clients and being paid for it vs reviewing and NOT is I think the main point here (jon)
Jon, you are clearly not in the industry from your comment otherwise you might have known that turning a client into a fee paying client is a compliance mountain with huge costs that must be passed onto the client. Providing service and assistance to the client is easy. Just BBC don’t use that word advice, you will need and SOA for that – $5,500 at minimum for that.
And yet the industry sits on their hands. The ARC high court challenge has had no more than 400 people participate. Whether or not you believe in, or even receive GR (for the record: I don’t have any GR and support addressing the problems it creates) , this was the one chance to stand up to the endless government oppression of our profession. This is far bigger than GR. And the response? Weak. A win in the high court or a vigorous challenge sets a precedent and will encourage these shameless amd expedient beauracrats to think twice before waving their regulatory wands in the future and nuking honest people’s lives . Imagine the LIF review against a backdrop of a high court challenge. There are few avenues left to genuinely fight and relying on AFA and FPA to issue strong words in the media is nothing short of pathetic. In fact, relying on them at all is a waste of time and money. The profession needs to adopt more aggressive tactics, targeting politicians, organisations and product providers that impact our livelihoods. For God’s sake we control billions of dollars of capital and are the closest in the whole value chain to the client . We have power if it is harnessed in a unified fashion. We should be slamming the door on specific product manufacturers in a coordinated fashion, extinguishing any trace of AMP from APLs, funding ARC, funding public campaigns against choice and conflicted individuals like Zinn and FaSea board members, all of whom are enriching themselves at our expense in a cesspit of conflicts and self interest. Imagine AMP fighting their advisers when the indsutry is redeeming billions of dollars from them in protest? It’s not hard to argue an investment in an AMP product does not meet the best interests duty. We should be shining a light on these people, their conflicts and their organisations conflicts. They have pointed the finger and intense scrutiny should now be placed on them and let’s see how they stand up to it. Most importantly we should be voting with our feet wherever possible. The time has simply come for coordinated boycotts, hitting hip pockets is outside the political process and is the only tool remaining as the political process has failed us. Nothing will happen though, this industry is simply too impotent. What a sad state of affairs.
Melodramatic, move on and service your clients, is they value your service they will pay, if they don’t jettison them and find others who will. More devastating is the lack of a consolidated effort by AFA & FPA to fight for our industry over the last 15 years.
Where have the AFA been for the past 5 years? Surely now is not the time to find a voice. Should have stood up when it counted
There is a glaring contradiction in this article. [i]On one hand it states that advisers are unable to review clients in the year and a half time frame till this becomes reality. On the other hand it states these clients will no longer be able to access financial advice[/i][i][/i]. If there isn’t time for the adviser to review them (in a year and a half) then what financial advice are they actually accessing?
This tripe reminds me of the boy keeping his thumb in the dyke to hold back the sea. The change is coming, stop wasting time and get moving.
so when do the retail super funds start rebating their share of the excessive fees? C’mon planners have started with their trail commission – there is a little more chicken on the bone for the retail funds… I bet you my house (if I still have it) that no other fee reductions will occur
I always believed the simple and easiest solution to conflict trail commissions was to make them opt-in ( in other words actually give the client some say and power in the debate ) . In this way , for those clients for whom the trail commission system of remuneration is working can continue on in this manner ( yes , there are actually some clients out there who are quite happy under a trail commission structure ) , and for those who feel they are unnecessarily paying higher ongoing fees because of commissions they can receive the benefit of lower ongoing fees and either self- manage their investments or change to fee for service advice . Or is this too simples ??
Christopher Zinn studied Geography. Wow.
Choice subscriptions should be subject to annual opt in. Their practice is to automatically renew subscriptions unless you opt out. Why the double standard?
[quote=Anonymous]The damage has already started, under Opt Ins. We are ditching clients at a rate of knots, with some being shocked that no one wants to talk to them anymore (including industry funds as well). It is a fact that registries of Fund Managers are quickly filling up with small investors, that no one wants to talk to. This is the biggest mess you could possibly create, due to the ridiculous FOFA laws. Awareness of these issues is fast growing among consumers, as advisers are explaining that this is the result of draconian laws put in place by devious Union Super Funds, along with the top end of town advisers, who sneer at anyone who would are unable to pay less than $10,000 pa in fees.. When consumers cannot even get advice, then “consumer protection” has gone far too far. [/quote]
Why are you ditching clients at a rate of knots if they are struggling to find someone to talk to? I agree Compliance has increased cost to virtually unworkable levels, but if you need to charge $10k in fees to make money there seems to be problem with your efficiency and running costs.
Surely their is a case for industry wide compensation. There are many instance previously where the government has stepped up with compensation after turning over long held practices (Sugar Industry for example). Common decency and probably Common Law demands compensation.
“PS Perhaps before you give advice in this industry – get yourself licensed as a financial planner!!!!!!!!!!!!!!! ” Couldn’t agree more with this statement . The ” Financial commentators / magazine editors at large” etc. who appear on morning TV shows giving general advice recommendations without any disclosures and who don’t actually have any financial planning qualifications compared to what we in the industry have to go through just to place an ad in a newspaper advertising our business is crazy . Frustrates the hell out of me .
like Uber etc introducing competition to Taxis. If you service and price are good enough, then you can adapt and thrive. If not, you die a slow and painful demise.
Money for nothing is over. Now the Gov needs to come up with incentive to get consumers to get advice. tax deductions etc or make everyone attached a super fund to their TFN that is follows them job 2 job. At least that would discourage multiple small funds, and encourage people to get advice.
[quote=uncle fester]Ah the AFA. Where were you during the RC standing up for your members. The government and insto’s have achieved their objectives.[/quote]
um no one stood up in the RC. It was lambs to the slaughter like never seen before. I think one guy did, the NAB MD, however he got pillared by the ABC, called arrogant and demoted from memory.
The unfortunate issue is the FPA and AFA are simply too late again. They also have different views which confuse government. The FPA for example will agree to anything as long as there is profit in it for them.
Whether its Grandfathered commissions, FOFA, The LIF, etc etc the FPA and AFA are just not on the front foot and then just mime platitudes afterwards.
You only have to see the incredible job the mortgage broker industry bodies did to see how woefully inept our bodies are.
Choice Magazine have been against commissions for years. Their chief spokesperson was Christopher Zinn, who happily kicked us all in the guts. He then left Choice, and joined Lachlan Harris at one big switch – hoovering up home loans, and getting the commissions.
What’s the end outcome here? FSC members boost revenue as they now retain investment trail. Fund members don’t get a rebate and pay the same. Advisers lose revenue and with it the ability to service clients.
IT IS HIGH TIME THE AFA AND FPA SHOULD MERGE, WE NEED ONE VOICE (needed it some years ago) AND A GRIP ON OUR FUTURES
The damage has already started, under Opt Ins. We are ditching clients at a rate of knots, with some being shocked that no one wants to talk to them anymore (including industry funds as well). It is a fact that registries of Fund Managers are quickly filling up with small investors, that no one wants to talk to. This is the biggest mess you could possibly create, due to the ridiculous FOFA laws. Awareness of these issues is fast growing among consumers, as advisers are explaining that this is the result of draconian laws put in place by devious Union Super Funds, along with the top end of town advisers, who sneer at anyone who would are unable to pay less than $10,000 pa in fees.. When consumers cannot even get advice, then “consumer protection” has gone far too far.
You know what.. it will be many years before the powers at be realise what they have done and the lives that they will have destroyed.
As for the pathetic organisation at CHOICE MAGAZINE. Who the hell do you think you are? You are simpletons (just like your RC submission). It astounds me that an organisation like you were even called upon to submit to the RC. When average Australians get less access to advice, pay more for advice, have no claims service and left to a call centre for help, then we will see how your pathetic recommendations will impact many, many Australians.
Aust Fin Review article – 15/8/2019
[b]“Today’s announcement is a great win for Australians,” said Choice policy and campaigns adviser for financial services, Patrick Veyret.
“Over six years have passed since the (Future of Financial Advice) reforms and yet financial advisers continue to receive between $1.5 billion and $2 billion every year in grandfathered commissions.”
Choice believes the passage of the bill is the first “substantive law reform” relating to a royal commission recommendation.[/b][b][/b][i][/i][i][[i][/i][i][/i]
Do us a favour Choice and stick to reviewing Fridges and Freezers. Go away.
PS Perhaps before you give advice in this industry – get yourself licensed as a financial planner!!!!!!!!!!!!!!!
and so the Institutions reclaim their client for free….RC completed
Ah the AFA. Where were you during the RC standing up for your members. The government and insto’s have achieved their objectives.
I fell off my chair. I’ve been an adviser for 20 years and in those 20 years I have NEVER EVER seen an industry association such as the FPA or AFA ….”hit out at the government ” .or even remotely come close to standing up for advisers…It’s always cup cakes and an annual seminar and or “let’s not over react and let’s just wait until the legislation” or “AMP wants this so yeah”….
So whether I agree or disagree with this issue I salute the AFA for standing up for advisers for the first time ever in my 20 year career.