In a recent communication to members, AIOFP executive director Peter Johnston said the adviser association had been approached by “a group of advisers wanting to seek damages against the financial institutions who prematurely shut down their grandfathered revenue during 2020”.
“These [actions] led to hundreds of millions of dollars being retained by the institutions that was legally owned by advisers,” Mr Johnston said.
“This action was arrogantly endorsed by Treasury/ASIC, which was of course eagerly obeyed by the institutions.”
Mr Johnston confirmed the group had secured financial support from a litigation funder and were now seeking more advisers to join the class.
“This should be of particular interest to the AMP/Hillross advisers who have been unfairly smashed in recent times,” he said.
Mr Johnston added the funder would be taking 30 per cent of the proceeds of any successful outcome as a result of the action.
He said more detail around the basis for the case would be announced at the group’s annual conference later this month.
The industry body flagged in 2019 that it was searching for a legal partner to take up a case against early commission removal on behalf of a cohort of its members, after ANZ wrote to clients more than 18 months ahead of the January 2021 deadline encouraging them to proactively contact their adviser to get the payments cancelled.
The AIOFP also attempted to mount a potential High Court challenge to the legality of banning grandfathered revenue after the royal commission, but the action fell over after it failed to reach its fundraising targets, and an individual adviser to stand as a ‘test case’ could not be found.
Imagine if you were starting a business competing with large companies that have structured distribution branches around Australia that you can’t possibly compete with. Rather than try to compete with that expensive infrastructure you decide to distribute your products through a number of small businesses that, while providing a service to their clients, are able to distribute your products at the same time. As a recognition to those small businesses distributing your products you agree to share some of the profitability that the customers of those small business provide to your organisation. Commercial terms are agreed upon by the respective parties and legal agreements outlining those terms are drawn up and accepted and signed by the parties involved. The small businesses start from scratch, do the hard yards and after many years those business become established, have generally happy clients and a recurring revenue. A goal that I’m sure that most businesses aspire to.
The regulators now decide that they don’t like the arrangement that was agreed upon and decree that sharing the profitability of the customers that the small business introduced to the (now) large business is inappropriate and will become illegal in two years (of course that couldn’t possibly be legal). Instead of supporting and recognising the efforts that the small businesses have provided in assisting to establishing the (now) large business they decide to stop that profit sharing immediately and are happy to make the small businesses scapegoats for any failings that the industry has suffered over the years. Many of those small business principles decide that this is no longer a viable industry to be in. All of a sudden the value of a lifetime’s work amounts to nothing, bankruptcies follow, relationships are strained and tragically some even take their own lives.
If this happened in any other industry other than ours it would be labelled a disgrace, because it is. Apparently it’s the evolution of the Financial Advisory industry. I’m all in for anything that remotely holds these organisations to account.
Well said…
Financial Planners are a funny lot. Seems like we’ve all got an opinion but when it comes to actually doing something, whether it’s FoFA , opt in or commissions or whatever nothing actually happens. Why is that?
im in 100% I still cant understand how they can legally take assets I owned with a current debt retaining but zero compensation. I cant wait to sign up to this action
Lets just lock this in here and now – THIS WILL NOT HAPPEN!!! This two-bit footy club of an association only seems to deliver on failed Chairs (read up on what has happened to the last 3 Chairs – what a respectable bunch 🙂 ) and overseas conferences that deliver on some ‘old school’ entertainment and I dont mean CPD! What a shambles this AFOIP is… go away and stop embarrassing all of us who have self-respect and respect for others. Further to the IFA stop reporting on this rubbish and stop being so obtuse.
Thanks AIOFP, it’s not a huge income loss % wise for our business. But it’s a principle thing, the fact the Govt, Treasury, Frydenberg think it’s fine to steal income from Real Advisers pre legislation is disgusting abuse.
On top of the fact they have then broken contracts, with zero compensations by banning these commissions.
Time to stand together Advisers and fight for our rights.
Where is the link so that we can become a part of this ?
At last someone (association) is trying to do something meaningful for advisers and protection of their business rights!!
It would be fantastic if the AIOFP can stop this maddness that APRA is steamrolling out on 1 Oct 2021 with the Income Protection changes which were brought in because the Life Insurance companies cried poor which was a result of reduced inflows as a direct result of LIF (Life Insurance Framework).
LIF is like the cane toad that was introduced in Australia to solve another problem, but that ‘solution’ has now become a bigger problem. If the issue was churning, all that needed to be done was the regulator requiring that advisers ask their clients how long they intended to have their cover for. If the answer was more than 10-15 years, an adviser would be expected as a default to struture the premiums as level premiums but an adviser could provide justification why level premiums were not appropriate for the clients and still set the clients up with stepped premiums. The client would have to sign or initial the SOA to say that they would like cover for more than ‘x’ number of years and then sign or initial to say that their adviser has explained why they have not recommended level premiums.
Instead the LIF cane toad was introduced which resulted in reduced inflows to life insurers which then threatened profitability and viability which lead to APRA forcing:
– the end of Agreed Value Income Protection from 1 Apr 2020
– guaranteed future insurability (after 1 Oct 2021)
– the end of 3 year look back for Income Protection indemnity cover to find the best 12 months (after 1 Oct 2021),which would suck big time if you were a woman who had gone on maternity leave and met with an unexpected accident just before returning to work and the last 12 months has no income.
APRA are salaried beauracrats who have the insurance companies as their puppet masters.
FPA and AFA have rolled over. I’ve looking at cancelling my membership and joining any association that is able to actually fight for the interest of the public and advisers.
While LIF is a factor, the biggest contributor to the problems in DII is the explosion in mental health claims. Mental health claims are much easier to fake than most other illnesses, but any insurer that dares to question a mental health claim will incur the wrath of the powerful mental health lobby. It’s much easier for insurers to quietly pay all these claims, and jack up the premiums of other policyholders to recoup the costs. The APRA changes are designed to limit this exploitation of the system, but of course they aren’t allowed to say it has anything to do with mental health.
The best solution to this whole problem is for insurers to make mental health cover an optional extra, and price it accordingly based on claims experience. Most consumers would be quite happy to exclude mental health cover from their policy in exchange for a much lower premium.
wont happen
I’m betting you’re wrong. Institutions entered into a contractual arrangement with financial advisers. They cut off the revenue at the mere hint of a legislation change – yielding them a great cashflow boost, meanwhile starving those that worked hard to take them the business. That’s immoral, it’s breach of contract and it’s wrong on every single level. It’s not conflicted remuneration if clients are informed. So this whole argument is a smoke and mirrors campaign that feeds the greed of institutions. Those that cut off the revenue prematurely literally savaged the hands that fed them. It’s time to hold them accountable. It doesn’t impact me at all, but I will stand on the line with those that were affected because I’m seeing hard working business people crumble and there is nothing good about that for our economy.
I too will stand up and am outraged!!! Well said
I agree with you… Im just saying the legal action wont happen. AIOFP’s track record in achieving ANYTHING is dire… and adviserse wont throw good money after bad.
Well done!! This is excellent, make them pay for what they have done illegally. I was asked to be an individual adviser to stand as a test case but had to decline as I was battling a severe stress induced illness at the time. Also, I believe that the fear of retribution from ASIC is a very real thing in our industry and everyone is afraid to stick their head up or to be “seen”.
They should be looking at BT as well, which turned off commissions on fully underwritten, retail policies which they wrongly claim were group policies. There could be big dollars in that, as the damages are continuing to accrue as every day passes.
So, how do you participate in the class action?
About time
Good luck to them.