The move follows an earlier letter ANZ set to advisers last month that reminded members with accounts that currently pay grandfathered commissions to consider ending the payment of future commissions to their financial advisers.
However, another letter from ANZ sent to members dated 3 June 2019 stated that they will “generally benefit from reduced product fees once commission payments cease”.
“Where you have an ongoing relationship with your adviser, we recommend that you speak to them to agree the appropriate way for you to continue to benefit from the services,” the letter said.
“Alternatively, you can advise us directly to cease paying future commission immediately in relation to your account. You are not required to notify your financial adviser in order for us to cease paying commission.”
Speaking exclusively to ifa, chief executive of the Association of Independently Owned Finance Professionals (AIOFP), Peter Johnston, called the letter from ANZ “clumsy” and “inexpedient”.
“Just how naive does the ANZ and ASIC think advisers and their clients are with this rather inexpedient and clumsy approach to grandfathered revenue?” Mr Johnston said.
“For institutions to say ‘you will generally benefit’ is institutional speak for ‘we will clip the ticket by charging an administration fee and you may have a bit left over for you…’. This theme clearly comes out in the ANZ letter.
“Unless it is legislated, institutions [or anyone] cannot be forced to give someone else their property and our legal advice is it is unconstitutional anyway.
“The advice community is very tired of the continual misinformation and negative political spin around grandfathered revenue.”
Mr Johnston reiterated the AIOFP’s efforts to challenge a potential ban on grandfathered revenue in the High Court of Australia.
If ANZ truly wanted to be transparent, they should add, “clients will generally benefit from moving to a different super fund”.
[quote=aNON]Why would your advice fees be more than the commission you receive? Are you providing your services at a loss if you are being paid via commission? How noble of you![/quote][quote=aNON]Why would your advice fees be more than the commission you receive? Are you providing your services at a loss if you are being paid via commission? How noble of you![/quote] Clearly a comment by someone that only understands the ideology and not the facts. Despite commission being pedaled as a cash windfall, generally it is only around 0.33- 0.44%pa of FUM, which is hardly a cash cow for the adviser that is actually looking after and providing service to a client. In most cases, clients remaining in these old comm products have less than $100K, so circa $440pa in total fees, which is a loss maker in today’s world. If you’re an adviser that does nothing for this, you deserve to lose it, however there are many advisers that have honored these arrangements in the best interests of clients at their financial expense. I am one that has done this in limited circumstances because some of these clients have been with the practice for some 35 years and have referred many higher net worth clients. They also don’t have the financial means to pay our minimum monthly fee of $110 per month that we have to charge now factoring in operational expenses, licensing etc. So in this situation, we will likely work for these clients for free and yes, how noble of us!
OnePath sent out a letter and ASIC told them to rewrite it with ASIC approval.Can’t totally blame Onepath here.
Just what are we doing with commission clients that we’ve been unable to move to a more…. “socially correct” charging method? ????? Are we just terminating the relationship come 1 Jan 2020, are we restructuring investments for them to self manage and ending or are we trying to be “thieves” and put them on a higher retainer…. or are we planning to charge once off SoA fees …. I’m already starting to see some orphan clients crying in my office because they want advice but they can’t afford it. What type of industry is so bad that it gets to the point that the regulator steps in and defines 1) what a service is 2) how it is delieverd and 3) how you pay for it. and increasingly what’s fair.
The reason advice fees would be higher than commissions is because of the cross subsidy from inactive clients to active clients inherent in the commission system. This cross subsidy allows advisers to charge active clients much less than the true cost of the service provided.
While this cross subsidy is arguably unfair, bear in mind the greatest beneficiaries are usually older, low asset clients who receive lots of valuable advice about maximising their age pension, and lots of practical help navigating the admin involved. This is high workload stuff for advisers, particularly when it is overlayed by so much regulatory burden. If these clients had to pay the true cost of the service they receive they could never afford it.
Removal of commissions will certainly make many clients better off. But to suggest that no clients will be worse off, or that commissions are “money for nothing” for advisers, is far from true.
Seems some people (based off comments) are getting confused. This is not related to the insurance business or Zurich at all, this is the superannuation/investment side of the business, that will eventually go to IOOF
The only impact this could have for Zurich is mistakenly associating this with them
Another epic policy failure by ASIC.
If the client elects to turn off a commission payment of .50%p.a and it it is immediately replaced with an ASF of .50%p.a. there is no benefit to the client, be it “general” or otherwise….none.
What ANZ are seeking to influence the client is in regards to turning the commission off and not replacing it with any form of adviser service fee at all……in other words, misleading the client and seeking to influence a decision by
placing an incentive to act and cutting the adviser completely from the arrangement.
I know that ASIC were completely unsatisfied with the customer response from the initial letters that went out and demanded OnePath send out more letters with a much more aggressive stance and encouragement included.
My understanding that the first round of tens and tens of thousands of letters only resulted in approx 500 customers electing to turn off the commission.
This result was not acceptable to ASIC !!!!! and so they went extra hard on OnePath in an attempt to increase the response numbers.
The relationship is between the adviser and their client….OnePath/ANZ are nothing more than a product manufacturer and are now taking charge of destroying and breaching an existing remuneration contract with distribution.
I have been told by OnePath that when ASIC walk into the room and demand something be done, they do it without question or challenge at any level whether or not they believe it is right, fair or otherwise.
This is the environment of fear that now presides.
It is wrong, it is unhealthy and it smacks of a misuse of power.
[quote=Garry]If they want to turn off the revenue, why not turn off the responsibility of the adviser as well for the life of the product. Also post adviser interaction, what stops the provider increasing premiums and having the protection of the adviser reviewing the premium, policy conditions etc so the advice is in the best interest of the client, and finally supporting the client at claim time, or is that part of the past payment.
Essentially would going forward…also they cannot change the Policy conditions on a retail product. Protecting the client against premium increases is a good laugh (not more churning allowed sir). Ill will pay the assistance with claims is VERY important…though this is about wealth, not insurance…so you lose again.
ANZ should be certain on if they pass the saving onto clients…then really what would Advisers have to whinge about. If clients are happy with their Advisers, then they will call them first. If they have no worthwhile relationship then they may ask to turn it off. More likely they throw it in the bin. This line is its own spin by a vested interest “The advice community is very tired of the continual misinformation”. Survey the investor community and 99% will say commissions should be turned off..
Whether you agree with the ban or not. As someone has already stated… ANZ sent this communication to existing clients, definitely talk to your OnePath BDM’s but I wouldn’t be throwing your distribution teams across AUS under a bus – this was done to alienate OnePath (Zurich) from the ANZ and get them out this mess ‘scott-free’.
“If you are not receiving any ongoing advice or service from an adviser…” Thats a big IF. Auditing probably 500 advisers over the past ten years barely remember a client getting any real service on a commission basis only. always marked up another 50 basis points…
If they want to turn off the revenue, why not turn off the responsibility of the adviser as well for the life of the product. Also post adviser interaction, what stops the provider increasing premiums and having the protection of the adviser reviewing the premium, policy conditions etc so the advice is in the best interest of the client, and finally supporting the client at claim time, or is that part of the past payment.
IFA – Please publish a copy of the whole letter
Not Zurich that has purchased OnePath’s investments business, IOOF. They will bear the brunt of those disgruntled advisers now loathing of ANZ.
I for one will not be placing any more business with Onepath. I might be a drop in the ocean for them however if we all follow the line then they will not have to worry about paying commissions. Seriously people enough is enough!!
Why would your advice fees be more than the commission you receive? Are you providing your services at a loss if you are being paid via commission? How noble of you!
RIP One Path!
Time for every adviser to call their OnePath State Manager / BDM and tell them that since support is a two-way street that their lack of support for their distribution network will be reciprocated. BTW I have no grandfathered revenue but when will the bullying of us advisers end. We have to stop giving up ground because we know the banks are relentless in their greed.
Simply a cash grab! The statement “Generally Benefit” highlights there is no guarantee. Sadly there are many older clients that still use the services of their adviser (withdrawals, Centrelink assistance etc), that will call up OnePath thinking they will save money, not realising that the services of the adviser will cease and they will be left out in the cold going forward. We have a small number of legacy clients still on commissions that we have not transferred to fees as it would result in these clients of limited financial means (that still require assistance from us) having to pay a much higher fee for service which 99% cannot afford to do. As it was in their best interests to leave on commission and retain in the product, with the view that we would continue to look after their affairs until these commissions ceased by legislation, we are now faced with two option, cancel the relationship or work for free! We have been notified that several clients have requested the commissions be rebated and in speaking to them, it was clear they had no idea what that meant to them going forward! To rub salt into the wound, OnePath/ANZ have a pool or orphaned clients with no adviser attached for which ANZ still receive a trailing commission from (charge the higher admin fee). Surprise surprise, apparently only clients with advisers attached received the commission rebate letter. My understanding is that ASIC are aware of this, but I highly doubt any action will be taken by them.
I’ll declare my cards in saying that I support the banning of grandfathered commission, however I have to say that I was pretty annoyed (I actually used other [b]”doing”[/b][b][/b][c[color=red][/color]olor=red][/color] words) when my wife handed her letter from OnePath.
The letter was poorly written, very confrontational and gave the impression that us advisers are a bunch of crooks…. all at the expense of the wonderful OnePath.
As far as I’m concerned the days of dealing with these muppets are over – OnePath you are dead to me!
Finally the advice community has a voice. Whether its Grandfathered Commisisons or fees to Super funds, we need to band together and stop being bullied.
Well done Mr Johnston.
Big Problem is ANZ just sold off their business to Zurich didn’t they?? so it would be Zurich who will be affected by a product ban ANZ/Onepath.
A more accurate comment for product providers to tell clients in relation to removal of grandfathered commissions would be:
“If you are not receiving any ongoing advice or service from an adviser, your costs will decrease due to removal of commissions. If you are receiving service from an adviser, you will need to pay them a fee to continue receiving that service, and the cost is likely to be higher than the amount you have been paying in commissions”.
ANZ are really looking to alienate advisers at the moment! I am sure these stupid letters are coming from the fat cats upstairs that pull the strings, but once again the poor BDM on the ground will cop the heat from the anger of advisers. Well ANZ, you can kiss any business from advisers goodbye from now on. All the best, it wasnt good while it lasted, you managers can stick your stupid products where they fit. .