The Hayne commission final report recommended that grandfathered commissions be banned as soon as practicable and set an end date of 1 January 2021, which was then subsequently supported by the government.
In a note sent to members on Tuesday, AFA chief executive Philip Kewin said the professional body is “very conscious” that a number of its members will have recently purchased businesses and client books that included grandfathered commission clients and that, as a result, will be particularly disadvantaged by the proposal.
Mr Kewin then asked for information from members to assist them on advocacy on the issue.
“We have long argued for a more sensible consideration of this issue, however a recommendation to ban grandfathered commissions had become inevitable,” he said.
“We believe that this 1 January 2021 time frame is problematic, particularly in the context that the end of 2020 is also the deadline for advisers to pass the FASEA exam.
“The royal commission report has disputed the issue of this being a breach of the constitution, through the acquisition of property rights on other than just terms, which is an issue that we will address as part of the consultation.”
The AFA also remarked on the Hayne commission’s recommendation that all clients should be on an annual opt-in, where the adviser is required to put in writing every year the services to be provided in the next year and the total fees to be charged.
In addition, product providers are to receive express written authority from clients before the client pays any fees.
“There is no indication of time frame at this stage. We assume that this does not apply to risk-only clients,” Mr Kewin said.
“This new measure will certainly drive up the cost of providing advice and make it less economical to provide services to clients with reduced capacity to pay fees.”
Very disappointed in the AFA for not raising so many views which demonstrate distress for clients and advisers. Its not necessarily in clients best interests..
Grandfathered commissions worked well for us and allowed us to distribute work to assist those most in need and irrelevant to their financial capacity as we didn’t charge for claims etc. Ok, so its a little income from over 1,000 of my clients each and it forms a income allowing me to serve those who’s hands are lifted calling out in great need. Cross subsidisation worked.
Centrelink receives taxes from Australian tax payers and thus help those in need and even those who pretend to be. Cross subsidisation is forced on us tax payers
Life policies require payment to a fund who then distributes a great portion of this to those in need and at most difficult time. We volunteer to contribute to cross subsidisation as vital for family and business stability.
Cross subsidies work and allow a great portion of Australian to get service efficiently.
Fee for service now means incredible compliance costs for every effort, and the ability to serve far fewer. The need is to charge the real value for this, a fee greatly higher than now, a fee greatly higher than grandfathered commissions.
There will be a great lot of orphaned clients with no ability to get served properly by trained advisers. They wont be able to pay.
It has been clear for a long time that AFA and FPA serve the big end of town and not the smaller practices. The Big 4 pay for their advisers to be members, why anyone else would be a member is beyond me.
Mortgage Brokers may well survive, as they should, due to their lobbying campaign. I can be likened to a mortgage broker, only I provide advice on the cheapest super fund out there which has the features the client desires (and this includes industry funds). The removal of planners and brokers will benefit the banks and not the consumers. The focus on how we are remunerated is a furphy. We create competition and put downwards pressure on prices.
New rules keep coming in, yet none are ever removed. If the #HayneFail recommendations are implemented, do we still need to do the 3.5 hour adviser exam, 40 CPD hours, TPB membership, Industry Funding Levy (which I rec’d on the day of the Hayne report – $2,750), ethics study and exam etc. Surely not, as we’ll all be as pure as the driven snow – just like Hayne.
Hayne focused on the means of distribution, not production. If you’re producing a financial product you can charge what you like, including shelf space fees to other investment providers, but when you are involved in the distribution you can’t. Product providers will subsidise their continued loss making advisers via the sale of their products.
Hayne has the commercial acumen of a snail. No idea why any government would base the future of our financial industry on a pampered former judge. That said, I do give the staid fart credit for marrying another judge 19 years his younger – who’d have thought?
The AIOFP is the only group which speaks sense.
Now that my business and retirement is about to be decimated I spent some time looking into why ive been paying member fees for 30+ years. The AFA unsuccessfully argued for the retention of grandfathered commissions while all other party’s including ABA, ISA, ASIC, FPA and consumer groups recommended that grandfathered commissions need to be banned.
The AFA, despite these comments, has done the right thing by me here as a humble adviser just as ive always done right by my clients. Sometimes doing the right thing just doesnt matter in the end.
The AFA and FPA are good at giving in. When will these lame duck organisations become pro active and preach the benefits of financial advice to the community. The charter of the Royal Commission was only directed to faults in our industry, not all the wonderful work and service that is provided.
How many advisers are going to be left after the FASEA reforms and this commission cut?. I had thought a total of 5,000 would remain, but i think it will be more like 1,000 only
who is going to service all the thousands of clients.
I believe you could be correct..I have personally spoken to our Minister for Family and Small business this week and git the standard “vote for us” response…unfortunately there appears to be no political will to do anything ….
Well Pauline Hanson had a cracker of an article in The Australian today on mortgage brokers and why they need to be kept.
I’ll give it go!!!!!!
I will still be around however will change my business model By charging at claims time up to 20% to make up for fee for service
It appears that a fundamental concept that the royal commission has slipped past everyone.
One of the major legal concepts the RC put under the spotlight was the fact that commissions do not entitle a consumer to any legal rights at all. The only way you are all going to keep your commissions is to lobby the government that instead of scrapping commissions, that they legislate that consumers become entitled to a specified level of service.
Good luck, I don’t like your chances…
Thanks for covering it well. grandfathered commissions worked well for us and allowed us to distribute work to assist those most in need and irrelevant to their financial capacity as we didnt charge for claims etc. Ok, so its a little income form over 1,000 of my clients and it forms a income allowing me to serve those who’s hands are lifted in great need. Cross subsidisation worked.
Centrelink receives taxes from Australian tax payers and thus help those in need and even those who pretend to be. Cross subsidisation is forced on us tax payers
Life policies reqire payment to a fund who then distributes a great portion of this to those in need and a most difficult time. We volunteer to contribute to cross subsidisation.
Cross subsidies work and allow a great portion of Australian to get service efficiently.
Fee for service now means incredible compliance costs for every effort and the ability to serve far fewer. the need is to charge the real value for this, a fee greatly higher than now, a fee greatly higher than grandfathered commissions.
There will be a great lot of orphaned clients with no ability to get served properly by trained advisers. they wont be able to pay.
Orphan clients who the banks will now market to and own…winner Kaching!
you sound like a socialist… so the actual question to ask is “so how will Australians benefit from this change”? Not sure if fewer planners, higher advice fees will leave Australians better off.
if you response was to mine above (2 above yours) then hiw could I sound like a socialist? Trust me, Im a capitalist and never had a job (never been employed) for when i left school i started my own rural business. No socialist here mate.
or they will have to pay a huge sum if they want to use a financial planner. don’t think there will be many left however after fasea and the grandfathered trails are gone
i am a member of FBAA and FPA. The FBAA call to action proves even more how pathetic FPA and AFA etc really have been for financial advisers. so disappointing it becomes sad
I’d like to dumb this down for you all.
If the Australian Medical Association was getting funding/ payments from a Tobacco Company, bundled them up as Member payments on their balance sheets how would the public react?
If the Victorian Medical Association was getting payments from a Drug Company and then lobbying the Government, how seriously would the Government listen to them?
If workers in Cigarette Company got a 10% discount on membership fees, and the Cigarette company paid for said members fees how would all the other members react?
So you really really STILL believe, that the FPA is acting in your best interest.
You got screwed by FoFA and LIF, you got screwed by FASEA, the banks got off scott free at the Royal Commission and you were mostly tarnished with every other financial planner and now it’s annual opt in yet you still believe the FPA is there for you. Isn’t it time the CEO of the FPA RESIGN for Jebus Sakes and we get some leadership in their that wants to put the needs of Australians First.
utter madness. yet people still remain members of this lecherous organization.
for god sake, just resign in droves, sponsor a few children instead of the membership fee. you will sleep much better at night. you will do good instead of supporting this godforsaken good for nothing association
As an individual member, and a licensee representative through the professional partner program, I consistenalty find myslef wondering about the duplicity of these programs and where they would land when members and licensee’s interests really diverge. I don’t think anybody at the FPA truly understands what ‘conflicted’ actually means.
Bloody hell, the last thing we need – capitulation from our last line of defence, the AFA. Oh well, AFA is simply today confirming what we knew all along at a deep level I suppose, now having said it themselves out loud – they are worthless as an industry association. We can all move to the UFAA – no brainer. Make it so!
what’s the point of paying for a lobby group when each time they are up for the challenge they roll over and play dead.
Grow some balls AFA and take the challenge and represent your members with passion.
perhaps they need to grab a hold of the mortgage brokers assoc strategy… our guys are asleep at the wheel.. too busy counting the $ from us idiots who are paying their assoc fees!!
As long as “members” keep paying the fees the FPA and AFA probably think everyone is onboard with the strategy…just a pity the regulators dont see our clients happily paying their fees in their chosen format as meaning the same….
I am so sick of the AFA and FPA just conceding on everything. Look at how the mortgage industry associations are taking up the fight for their members BECAUSE ITS THEIR JOB. Their job isn’t just to accept bribery payments from the insto’s and roll over on command like our pathetic associations do.
i thought if you pay for lobbying, the lobbyist will actually lobby for you.
isn’t that the deal ?
They are not “conceding” they are doing as exactly as they are being told by their puppet Masters….the Banks.
You do know what a Puppet is don’t you? Look at the Dictionary and there is a picture of the FPA getting a cash payment via the Professional Partner Program, the banks and the promise of 300 new members.
The question is are you going to continue to pay money to the Puppet and be a Muppet.
for god sake, why are financial planners most of whom, do the right thing by their clients time and again still paying to be members of the fpa and afa.
they are wasteful organizations, good for nothing. for god sake, be brave, at least 1 of you cancel your membership today
So many planners are now seeing the united force that the mortgage industry employs when their members are under threat. When will the planning associations actually start to stand up for the planners. It seems never – no matter what the government and other regulators throw at us. The mortgage industry is not only lobbying govt etc, but are going direct to consumers for their support. I suppose myself and other planners are living in a dreamland to expect their support considering our bodies stay quiet as they don’t wont to rock the boat with [s][/s]product provider friends. Why say you are a planner body, just be honest and say you represent product providers…..
No frikken ethics in any of them I’m afraid…
If the Liberals are shooting for votes by indicating they will act on all Hayne’s recommendations because of the compete and utter stuff up that has ensued within their own party, then I reckon they may just receive the largest ever protest vote they have ever experienced.
Whilst the Labor Party is a complete abomination regarding financial services and significant conflict of interests with industry funds, the mental state of advisers at present is so low that it may just result in the “who cares anyway” attitude when it comes to the Federal election.
If the Liberal Party want any chance of preserving the advisers votes at all, they need to come out and state they will consider the pricing impact to the consumer, the destruction of adviser’s businesses and the shift of market domination to the large banks, industry funds and vertically integrated advice models.
The Liberal Party is NOT the party for small business as Malcolm Turnbull stated.
He did nothing for small business at all…let Kelly O’Dwyer run rampant and now they are still intent on killing small business and giving big business the open run they want.
For individuals and businesses that may have supported the Liberal Party over many many years, it is a disgrace how they have treated political loyalty.
There’s the political manifesto right there “The Liberal Party will consider the pricing impact to the consumer, the destruction of adviser’s businesses and the shift of market domination to the large banks, industry funds and vertically integrated advice models and will act in the consumers best interest”.
Wake up. Do you honestly think either cares about the votes of planners or even mortgage brokers? They care about the millions of mums and dads, who have read and heard nothing but how evil the banks and other financial intermediaries are for the last 12 months. If you want to see a protest vote? Find a politician who says they won’t act on the RC’s recommendations.
“There is no indication of time frame at this stage. We assume that this does not apply to risk-only clients,” Mr Kewin said.
I say its the job of the AFA and FPA to find out what the timescale is and ensure it does not apply to risk insurance otherwise its the end of the industry!
My suggestion to everyone on here is to join up with the United Financial Adviser Association (UFAA). Its run by advisers, not funded by instos and will be fighting for advisers. Unlike the useless FPA and AFA who are paid to do their masters bidding.
PLEASE!!! Everyone join this and stand up. I did as did my whole office (that’s 6 of us). Admin staff can join as it has a drop down for what role you are in. thank you.
Note from local mortgage broker. “ all new loans will have my fees added to the new loans.” Howzat, the bank will love it, another load of interest to collect
What an absolute disaster and joke this whole circus has become. Hayne finds that the banks have rorted the system and the people, big surprise not and that the regulators have basically been asleep at the wheel and are not worth a roll of toilet paper, but that’s ok we will give them more money the help the poor devils and create another watchdog of bureaucracy on top, no big deal.
The Banks, well lets see what will we do there, that’s right nothing, so how can we inflict pain and suffering somewhere to justify the millions spent and our wages and this sideshow, know lets smash Financial Planners and Mortgage Brokers and given them no income and devalue their businesses so they are worth nothing ,problem solved , what a great outcome I have achieved say, Kenneth, there you go Josh problem solvered I’m off to the bank now to put my cheque in, thanks for the business.
On behalf of all rolls of toilet paper I think a comparison between my clients (rolls of toilet paper) and ASIC is rather unfair…a toilet roll is useful…
Caveat emptor. It would of been foolish to pay lofty multiples for any pre-FOFA trail based commission. It’s been 5 years to get your house in order. The mortgage brokers have been given 5 months
What the hell does “grandfathered” mean? Is it ok to create legislation (FOFA) which then is relied upon by lenders and businesses ONLY to be stabbed in the back?
So, if LABOUR gets in to power and “grandfathers” all previously held negitive gearing on properties only to remove this in 3 years when re-elected would you not cry foul?????????????????
the whole thing is BULLSHIT!
Does Kenneth Hayne and the Govt understand that as a result of these recommendations there will be people who may well take the worst possible option, lives will be destroyed, relationships and marriages will end, children will be separated from parents and people will lose employment and financial security placing tremendous pressure on debt commitments and living expenses resulting in enormous stress,
anxiety and ultimately loss.?
This is not what may happen…..this is what will happen.
They already bought up shares in the Banks in anticipation of the bank share price rises – so one has to believe that they don’t really care. Bur we really do, as an industry need to be close to our fellow colleagues as the mental anguish of all of this has NOT been considered. First Dover, Now RC. Then FASEA….THEN F%#$@ what? I guess it depends on who survives as to what their next strategy will be to destroy our small businesses.
Its happening now. i wrote to Josh F last night
So, am I right to understand here that the AFA is conceding defeat and will not be standing up and fighting this issue like tomorrow doesn’t matter ?????
The mortgage brokers are on the front foot immediately, in the mainstream media and having the Treasurer agreeing the impact of banning commissions will destroy their industry and pass the power and market control back to the banks.
The banning of grandfathered commissions and the proposal to reduce risk commissions will decimate this industry and destroy peoples lives and hand the market share and power to the banks also.
The AFA should be arguing against this proposal on the basis of forced acquisition of property,financial deprivation and significant impact, significant increase in cost of advice to the consumer, condensing the advice space to banks and vertically integrated models and the disadvantages to many clients being moved from older products to products that will pay a service fee.
This MUST happen NOW.
Thanks for covering it well. grandfathered commissions worked well for us and allowed us to distribute work to assist those most in need and irrelevant to their financial capacity as we didnt charge for claims etc. Ok, so its a little income form over 1,000 of my clients and it forms a income allowing me to serve those who’s hands are lifted in great need. Cross subsidisation worked.
Centrelink receives taxes from Australian tax payers and thus help those in need and even those who pretend to be. Cross subsidisation is forced on us tax payers
Life policies reqire payment to a fund who then distributes a great portion of this to those in need and a most difficult time. We volunteer to contribute to cross subsidisation.
Cross subsidies work and allow a great portion of Australian to get service efficiently.
Fee for service now means incredible compliance costs for every effort and the ability to serve far fewer. the need is to charge the real value for this, a fee greatly higher than now, a fee greatly higher than grandfathered commissions.
There will be a great lot of orphaned clients with no ability to get served properly by trained advisers. they wont be able to pay.
Ahh yes, just rollover and concede defeat. There is daylight between the Industry Associations for Mortgage Brokers & Financial Planning. One is concerned about self preservation the other actually fights for its members interests.
If the people asking the question about the banning of grandfathered commissions bothered to read the report it is clearly referring to super products NOT risk. Risk is another matter and he’s recommended commission on that to be reduced to zero in the future unless there is compelling reasons not to do so. I have 1 compelling reason.. If you reduce the commission on risk to zero you can also reduce the average clients ability to receive advice on it to zero. What is very amusing is seeing the mortgage industry and it’s relevant bodies firing up about them losing ongoing trail and potentially up fronts as well. Welcome to our world!
AFA is a toothless tiger who has given in the fight already.
I am surprise that Slater and Gorgon are not already involved somewhere so that they can l charge a percentage of the win (that would be commission if it is a percentage wouldn’t it ?)
The castle was just a great movie to watch. Now the reality is here.
Tell him he is dreaming!
Thanks Kenneth, i bought an insurance book a few years ago and still owe $340,000 on it. Hope you sleep well at night knowing i will probably have to sell my house now. Maybe my life insurance will sort it out, if my wife can get a claim paid!
Hi anon, this comment has stuck in my head since I read it yesterday. Mate, I feel your pain, I’m in a similar position as I’m sure many of us are. There MUST be some sort of legal compensation plan etc ? maybe a class action against the Life Offices as I’m sure like I did you signed Life Office agreements stating the payment of ongoings per the advice you gave and per the remuneration they agreed to pay you/us Just hang in there buddy, its not legislated yet so keep going, bus as usual for now.
Can someone, ANYONE! please define the term grandfathered commissions, I’m sure these idiots have no idea what they are talking about and frankly neither do I, By grandfathered commissions, do they mean only Invest trail coms or do they mean insurance renewal commissions? Opinions PLEASE
They mean investment trails and mortgage trails. Risk commission trails are specifically NOT included in pronouncements from this farce of a royal commission. They are locked in until LIF has run its course and THEN have to be analysed again. They will stay- there is no other viable option for ordinary Australians to get insurance advice. They will NOT pay fees (please don’t tediously argue about this anyone) unless they are HNW clients and have other stuff like investments to subsidize that fee and will need advice. How ironic – that word “commission” in Royal Commission – only just noticed that!
Seriously, anyone who has recently paid up for a book of grandfathered revenue clients is just facing natural selection.
What the hell does “grandfathered” mean? Is it ok to create legislation (FOFA) which then is relied upon by lenders and businesses ONLY to be stabbed in the back?
So, if LABOUR gets in to power and “grandfathers” all previously held negitive gearing on properties only to remove this in 3 years when re-elected would you not cry foul?????????????????
the whole thing is BULLSHIT!
Your level of empathy and consideration is overwhelming.
I can only assume you are a brilliant and compassionate listener when your clients speak.
really, up until now most businesses were sold on a multiple of revenue.. stop being a troll you fool
Every time there is a debate on grandfathered commission there is a lack of precision in language on all sides. Does Mr Kewin suggest the term “grandfathered commissions” not only means trail commissions on INVESTMENT/SUPER, but also service commission on RISK. PLEASE CLARIFY !!!!
old risky, all comments seem confused because our esteemed leaders making these decisions do not understand the industry!!!!
Ol’ Risky, My solid understanding is that grandfathered coms means investment/super and NOT risk renewals. It drives me buggy too how they just rattle off this ‘grandfathered’ term without any explanation the gooses. I’ve seen NOBODY use the term and specify what they mean. I’ve even called for explanations in these pages and others and nobody responds meaningfully. Ridiculous.
Ongoing risk commission has never been referred to as grandfathered..
Did anyone say “Slater and Gordon”. A class action is inevitable.
Whats inevitable is us wasting more money having to join a professional organisation just to keep our TPB memberships. There are many people that dont go to meetings, dont even engage at all with either the FPA or AFA , but they still pay every year as the TPB requires it. Once this requirement is superceeded with the new education levels, its inevitable both associations will lose many many members. Watch this space.
Spot on. The big loser is the FPA. They were hoping we’d all be forced to join. The only advisers left will be CBA advisers because there membership is paid for them.
ANZ pays for their advisers memberships too. I think all big 4 banks and AMP are paying these memberships fee for the planners and getting bulk discounts for doing so.
…not to mention their 100% adoption of the strategy these muppets at the AFA and FPA come up with…or like ASIC are told would be ‘appropriate’.
it doesn’t make any sense to join the FPA and pay an annual fee.
once you are fasea accredited just join a code monitoring body and you would be fine.
no point doing the CFP either as one would have obtained a superior qualification being a post graduate one (with an actual AQF 8 or 9 rating) plus passed the fasea exam so no need for FPA as those of us with a post grad quals would get exemption from CFP 2- 5
so why repeat CFP 1 ( ethics) , then do a case study (soa) and multiple choice exam. when you have already tested for and passed with the aforementioned post grad qualification, fasea ethics and exam, plus post grad quals
as for warrant of fitness, we have to do CPD through our dealer group anyway so no need for the FPA unless you want to waste valuable time, and money, paying them an annuity type low risk fee so they can wine and dine their mates, and twit on your behalf.
finally, if you must, you can join them for their advocacy efforts on behalf of financial planners if you believe they actually advocate for advisers (ha ha wanted to post something funny)
Did some one say fee for no service?? i’m sorry i misheard it was TPB!