SIAA concerned about QAR impact on ‘product-neutral’ brokerage 

In its submission to the QAR – Conflicted Remuneration Paper, the SIAA said that brokerage is “product-neutral” and should not be caught up in any changes to conflicted remuneration.

“As stated in our submission to the Quality of Advice Issues Paper, the ban on conflicted remuneration was targeted at removing conflicts of interest in financial advice due to payments from product providers to those providing advice,” the SIAA submission said.

SIAA added that its member firms generally provide advice to retail clients through a system that pays advisers a retainer and a share of the brokerage charged to clients.

“Treasury noted at the time the FOFA reforms were implemented that a transparent and product-neutral regime with a client-paid fee — which is what brokerage is — would not be subject to the ban on conflicted remuneration,” its submission said.

“These arrangements do not give rise to the types of conflicts that the FOFA reforms were seeking to address. The same commission-sharing arrangements apply between the firm and the individual adviser regardless of the particular shares that a client may buy or sell.

“An adviser does not benefit from steering a client into, say, buying BHP rather than ANZ, because his or her commission will not differ because of the particular security, nor will BHP or ANZ provide incentives to the adviser to recommend their shares.

“That is, brokerage is product-neutral. This is the reason why regulations were passed to ensure that the traditional remuneration arrangements of brokers were not unduly impacted by the conflicted remuneration provisions.”

The submission added that the SIAA is concerned any changes to exceptions regarding conflicted remuneration could lead to “unintended consequences” that will affect its members.

“It is important to ensure that any regulatory change does not create unintended consequences that impact on the ability of stockbrokers to charge commission brokerage to their clients and remunerate their advisers,” the SIAA said.

“Brokerage fees were not raised as an issue in the Hayne royal commission and we are not aware of any reason why changes are required to these provisions, other than to clarify what is a complex part of the law.”

The FPA also responded to the QAR – Conflicted Remuneration Paper, expressing its disappointment with the exclusion of the outcomes of the Life Insurance Framework (LIF) Review — which included two ASIC life insurance advice file reviews and a life insurance data collection.