The disallowance motion reversing the government’s FOFA amendments will severely restrict advisers’ ability to change licensees, financial services law firm The Fold has confirmed.
The Fold managing director Claire Wivell Plater said advisers wanting to leave their existing licensees would lose all grandfathered trail commissions.
“I can’t see how advisers whose trail commissions are a significant part of their income could afford to wear that loss,” she said.
“Which means they will be forced to stay where they are – even if they’re not being well supported by their licensee, or worse still are in dispute with them.”
Ms Wivell Plater suggested the government should reinstate the grandfathering provisions, calling it a “win/win/win situation”.
“It’s a win for advisers because they will not lose a revenue stream they earned under the prevailing rules of the day,” she said
“It’s ultimately a win for licensees because it will allow each to compete on its own merits in the battle to attract advisers.
“It’s also a win for industry sustainability because it avoids wiping significant value off adviser businesses with the stroke of a parliamentary pen.”
Ms Wivell Plater’s warnings were echoed by Synchron director Don Trapnell, who issued a statement suggesting the disallowance motion amounted to “restraint of trade” for the financial advice industry.
“A whole sector of Australian small business will be restricted in their ability to choose a means of distribution that is in line with their culture and their business model,” he said.
Consumers were also likely to suffer as advisers shift the cost of lost commissions to their clients, Mr Trapnell predicted.
“Even if advisers bite the bullet and change licensees anyway, they will then be forced to charge their clients an ongoing fee for service,” he said.
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