In a communication issued yesterday, Hall & Wilcox partner Adrian Verdnik said the FOFA disallowance is a “major blow” to financial advice licensees that entered into transactions in the last few months on the basis that the government’s amendments would be passed.
“The practical effect of those grandfathering regulations being disallowed is that benefits paid under a ‘redirected’ grandfathered arrangement are once again prohibited, irrespective of whether the transaction completed during the disallowed period,” Mr Verdnik explained.
“A purchaser that acquired a book of business during the disallowed period that included grandfathered commissions may find the income they receive on the book to be much less than they expected.”
Performance bonuses and other benefits provided to advisers during the disallowance period on the understanding that they would be exempt from FOFA’s conflicted remuneration ban may also be in the firing line, Mr Verdnik said.
However, he also reiterated ASIC’s pledge to take a “facilitative approach” to FOFA compliance up until the transition period end date in July 2015, as previously published by ifa.
In addition, the lawyer said it was very unlikely that advisers would be compelled to go back and provide renewal notices and fee disclosure statements to clients that missed out over previous months, arguing there should not be a “retrospective obligation” to meet these requirements.
Speaking to ifa, Synchron director Don Trapnell said a number of practices within his network will be in this situation, whereby they have acquired client books or other assets that may now be under threat.
“It is nothing short of a breach of natural justice,” Mr Trapnell said.
Mr Trapnell is one of a number of licensee bosses meeting to discuss the issue at a forum held by the AFA today.
Oh the complex ways in which political power operates where behind the facade of institutional structure inevitably lie real men of great power. The decline in the professions power to interpret legislation as we now live in an age in which every person potentially becomes his or her own authority on matters of diet, health, lifestyle and general management of him or herself matters that in an earlier era would have been the preserve of so-called knowledgeable professionals. Oh
the concept of multi-level governance, where local decisions are dependent on higher political levels and many other actors within society. The traditional approach to use legislation to solve our problems neglects aspects of political power and agency. This researcher is finding out that there must be greater attention to politics, power and conflict.
It just goes to show how the FOFA rollback regulations were designed to benefit financial planners rather than their clients, mum and dad investors and retirees. All those expected bonuses, trailing commissions, volume benefits built into the planner’s business model had only the planner’s best interest and not the client’s best interest at their heart. It is a lament that will find little sympathy from those whose savings were to pay for those big bonuses.
good news rosella: http://www.ifa.com.au/news/139…
My business is in start up and i have been waiting almost 2 years to buy a client book, i just want to make it known that i find it terribly unsettling to work in an environment of such great uncertanty! How can one run a business this way???
I am waiting and hoping to see that a fair and practical decision is finally reached! and that it be one that we can stick to! Rosella Mamone ADFS
You have nailed it well Craig, another factor not considered at all is someone in my position! and others,in my situation i have purchased four client books using the specialist lending division of one of our big four banks, how would it work if my Dealer/Licencee group went down! ie Compliance/Financial etc etc as an example! Am i just supposed to sit there and sink with them? because now i would lose all the purchased revenue that is Grandfathered if i left that sinking ship. I have not in 37 yrs in this business seen such a stupid, ridiculous situation THAT WE ARE NOW IN.
Perhaps Jackboot Jacqui and Revhead Ricky would like to stump up the compensation for the detrimental financial impact their backflip decision has had on financial services businesses?
Unfortunately,without the financial support of big Clive to bankroll her,I would suggest Jacqui wouldn’t have the necessary funds or support to fight a class action.
Jacqui’s army training has taught her to shoot first and ask questions later.
As for Ricky, he could probably fund it over 20 years on a $1 per/km basis.
The unfortunate and serious side to all this is that neither of them would have had or still would not have any concept or remote understanding of the financial impact of their decision on the consumer or small business.
This is a result of having uninformed, nave and inappropriately qualified and educated people in politics who just don’t have the skills required to fully assess and predict the consequence of an action.
If advisers are losing value of their businesses due to the unfair roll back of FOFA then we need to be compensated for the loss and the AFA and FPA should be putting together a case against the Federal Government.
The absolute disregard for customers by CBA and Financial Wisdom is only making worse.