The FPA has told the royal commission that grandfathered commissions should be phased out over a three-year transition period, alongside similar advice from ASIC.
In its response to the royal commission’s second round of hearings, the FPA concurred with counsel assisting Rowena Orr QC that it may be appropriate to review the practice of permitted conflicted remuneration for financial advisers under the FOFA grandfathering clause.
“Grandfathered commissions has led to an environment where many clients are paying fees and yet receiving no services,” the FPA submission states.
“Ceasing grandfathered commissions and making all ongoing fee arrangements subject to opt-in will result in grandfathered fee arrangements quickly coming to an end where no services are being provided to consumers.”
The submission goes on to make an official “FPA recommendation” that “grandfathered commissions on superannuation and investment advice should be phased out over a three-year transition period”.
However, the submission added that the statutory carve-outs to the conflicted remuneration ban should be maintained.
The corporate regulator also took aim at grandfathered commissions in its submission to the royal commission.
“ASIC believes that the grandfathering of commissions should cease as soon as reasonably practicable and to the maximum possible extent,” the submission said.
A full list of the submissions made to the royal commission can be read here: https://www.ifa.com.au/news/25505-royal-commission-round-two-responses-released
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