The poll, which received 16,837 responses, asked ifa readers whether a ban on grandfathered commissions will negatively or positively affect clients, or whether it would have no effect.
The poll results indicated that ifa readers overwhelmingly believe clients would benefit from a ban on grandfathered commissions, with 12,674 respondents (75.3 per cent of the overall cohort) selecting this option.
Respondents who believed such a ban would result in a negative outcome for clients accounted for 23.2 per cent of the overall responses, with 3,914 readers selecting this option.
Only 1.5 per cent, or 249 respondents, believed a ban on grandfathered commissions would have no impact on end clients.
The results of the poll come as both BT and Macquarie announced they would each be switching off grandfathered commissions to their salaried advisers.
In May, both the FPA and ASIC came out in support of removing grandfathered commissions, with the FPA stating at the time that allowing grandfathered commissions had “led to an environment where many clients are paying fees and yet receiving no services”.
[quote=Anonymous]That is nobodies fault but themselves. The only reason books trade at 3x is the assumption that you can buy clients and not service them. If you expected to buy clients and not provide them a service, thats just karma.
If you intend on servicing the clients, you’ll have no problem charging a fee.[/quote]
NO ONE BUYS A RISK BOOK TO DO AS YOU SAY!. RISK BOOKS HAVE VALUE BECAUSE THE CLIENTS ARE PROVEN TO TAKE ADVICE AND MOST PAY PREMIUMS RELIABLY. MOST PURCHASING ADVISERS REVIEW THE BOOK, DEPENDING OF COURSE HOW LONG THE CLIENT HAS HELD A POLICY. INDEED, POST LIF, THE 20% NEW RENEWAL IS ATTRACTIVE, BECAUSE IT INCREASES THE LONG TERM VALUE OF THE BOOK, AS WELL AS RECOVERING THE PURCHASE PRICE QUICKLY. THIS IS DESPITE THE DANGER OF THE NEW 2 YEAR CLAWBACK !
commissions are not a fee for service so stop referring to them as that.
That’s a bit harsh. So what’s the difference between an adviser that gets a trailing commission of 0.6% and then charges an asset based fee of 1%? Answer who cares.
As long as the fee/commission/coconuts are clearly disclosed as required under law, and the adviser provides a service whilst meeting the fiduciary obligations introduced in 2013 what does it matter? If you’ve got 8000 clients and think being around to process a withdrawal meets that fiduciary obligations you’ve been working for a bank aligned dealer group for the last 5 years.
What does it matter “how” we charge? What really matters is those highly educated and professional advisers who are self licensed or belong to a privately owned firm…. versus those scum bag cowboys that work for a product aligned advice heavily subsidized bank owned etc advice business. Please get the criticisms correct. What is dragging us back is not how we charge but what licensee you select to work with. As soon as we get rid of this relationship with product manufactures.
Yes they are.
12,674 respondents ?????? I have been reading IFA online for years and there is never ever more than 50 comments on any article and then when you look at “likes” or “thumbs down” dislikes it usually ranges between 4 to 20 responses per comment. So, you want us to believe that 12,674 individuals took this poll? Complete BS and totally rigged by the handfull of trolls that I also see commenting on here. Even more disgusting is IFA turned it into an article?
EXACTLY – this biased “POLL” allowed multiple votes from the SAME IP ADDRESSES !
CORRECTION, it was actually 16,837 “respondents”……
So, I tested this theory above and took the latest poll on IFA in regards to the FASEA being fair? I was able to vote over 40 times in 3 mins and was able to change the “looks unfair” and “hard to say…” % numbers easily. GREAT WORK IFA ha ha
If the fund managers buy it back, i will have noi issue with them switching it off
Am I missing something here? If grandfathered commissions are removed, the only way the client benefits is if the insurance company passes that back to the policyholder. In the absence of that being prescribed in law, the odds of that happening are miniscule. So, not only has the client lost the option of the adviser being remunerated by commission, they now have to pay the premium AND the adviser’s fee. Pretty hard to find a win in that!
Where does this stop. Commission is simply the cost of doing business. If the contract or application or PDS says that a commission will be paid to the sales agent, then so be it. To remove this on a grandfathered basis means what. That the companies that had such policies in place will reduce their MER for product. Does this apply to insurance and what about mortgage brokers etc.
This is nonsense driven by those with self interest in mind. This means profit at the expense of the consumer regardless of the adviser. Will this apply to telephone sales crews that re sell product and makes a clip on calls made. Then lets move to companies that use sales forces in general and look at commission oriented sales as a general principal, There is no merit, much less understanding by those running such nonsense. Just fools with the causalty not just the advice insustry but consumers as well. Stupid and very short sighted. If you want to clean up the industry, what about opeing a jail cell for some CEO’s and their minions who sat back with fine wine and bonuses at the expense of consumers and advisers while their branches plied their trade of deception!!!
The big winner is AMP….NAB, CBA etc etc. These businesses can cope with the red tape, compliance and provide heavily subsidized advice at a loss in return for more FUM/AUM.
ISA please follow up this survey with another survey that asks the following. If you completed the survey on grandfathered commissions are you an adviser with more than 10 years experience dealing directly with clients ? I suspect 75% will answer no.
Ive got more than 10 years experience and I think they should have been gone a long time ago. You just need to decide between common sense and greed.
What astonishing ignorance, carelessness or stupidity. Three quarters of the people who took part in the poll believe that customers get better service if no-one is paid to service them. Advisers who were paid to service them are not paid any more and service improves? Madness.
Perhaps those people were talking through their pockets. Perhaps they do not want those customers to get any service in the hope that the customers will abandon their products.
What about advisers that have purchased a book recently, that have grandfathered commissions as part of the structure, on which they paid 3 times for, and now the big end of town are saying stop the grandfathering. Come On is that fair.
That is nobodies fault but themselves. The only reason books trade at 3x is the assumption that you can buy clients and not service them. If you expected to buy clients and not provide them a service, thats just karma.
If you intend on servicing the clients, you’ll have no problem charging a fee.
Most people in the industry have this garbage going straight to the junk mail so how could they vote. Clearly IFA is just another bullshit rag!!!
I love that this comment got through moderation. Has someone at IFA given up?
Could be free thought and opinions are welcomed…maybe that’s what makes IFA mag so great. Keep that in your mind as in another trade publication if you said something…not polite… about an advertising partner it won’t get published.
A mess driven by ideology congealing in ASIC courtesy of the consumer triffids and the industry funds marketing. I no longer have skin in this game. When I did, these folks with investment only policies required servicing, but paid no direct cost. Never charged a fee, just as with life insurance claims. Changed nominations, discussed investment issues, all for a farthing or two a month.
As noted, Macquarie & BT are looking for PR brownie points FOR SALARIED ADVISERS ONLY. ASIC seems stymied. But remember, none of us hold agency agreements direct with insurers or fund managers, so if our AFSLs are bought out by promises from manufacturers to change product costings and pass on savings to clients, advisers will be stuffed-we will have no say.
Perhaps the journo might ask ASIC and the others who fed her this story EXACTLY how clients will benefit.
Matters such as; client best interest duty, conflicted remuneration and fee for no service have a common nexus with grandfathered commissions, hence the focus on these now outdated commercial arrangements. The more some participants in our industry kick and scream to hold on to these payments, which were only ever introduced to retain and entice more support for the product, then the more harm it does to our profession in the eyes those who may consider engaging with us in future. There is an answer out there somewhere, but landing on the best fix to appease all stakeholders in these arrangements will be the challenge. Perhaps often used advice to clients such as compromise and trade-off may play a role in clearing up this matter.
Correct. Problem is we have a bit of a ‘boys club’ of advisers that struggle to be weaned off the teet that is ‘grandfathered remuneration’ so they are as you said, kicking and screaming.
Time for everyone to provide a valuable service to their clients, only then will you still get paid. How it always should of been.
yes, you do have a point, however there is the issue of staying in business, if Grandfathered commissions are “just switched off”, some, if not many business would struggle to survive or just have to close their doors. a rational and mature approach is needed here, not some slash and burn mentality designed to curry favour with the world at large. Frankly a phase out period is desirable , done in such a way as to ensure both adviser and client are able to gain some benefit from the change.
Im guessing there wull be a fiqr number of accounts who will not sign up for an ongoing fee arrangement, they may, or may not be happy to pay fukll freight on an advice fee when next they want to ask questions of their advisder about their super (and im guessing most of these accounts will be superannuation)
The assumption that grandfathered commission is something for nothing is just that – an assumption. The reality is that the big institutions are not set up for personal advice. That is a fact and this has been reinforced by the royal commission. The other fact is that financial advisers provide personalised service. So while clients will receive a reduction in fees if the commissions are turned off they will also be disengaged from any personal service. The consequences of this are significant. No reassurance when markets are volatile,no help with withdrawals and cash flow assistance, age pension and tax queries etc etc The long term will see fewer customers invest with the big institutions and a sea of orphan customers with no one to turn to for help or guidance. The current system works. It is not head in the sand defiance.
Contrary to the initial expectations of many, it now appears that neither BT or Macquarie will be reducing fees on old products or rebating commissions to clients. Consequently this “brave” move by Mac and BT will simply put an additional 0.4- 05% pa in their pockets at the expense of the advisers. Then, when the client wants advice or some level of service, the adviser will charge (and be perfectly entitled to do so) a fee for that advice. Not sure how this benefits the client in any way? BTW i have no commsion clients so have no axe to grind either way.
Exactly right Simon. BT are preventing advisers from waiving or dialing down commissions, so they can’t replace the commission with a fee. I have clients who are stuck in Wrap Essentials. They can’t get out due to capital gains tax implications or Centrelink issues. I have no option but to take the commission and kick the can down the road. The only logical conclusion is that BT are waiting for commissions to be banned so they can keep the money for themselves, screwing both the client and adviser. They are a disgrace. Other providers gave us the option before FOFA so it can be done. The spotlight needs to be shone directly on these product provider thugs who are holding our profession back.
Apparently commissions are just bad now, because the industry funds told us so. Seems to be working for Purple Bricks, until a house passes-in at auction and the vendor realises they have to pay the fee even though the house doesn’t sell and then pay a second time if they want to try again. No different for life insurance, fees will be paid even if the client doesn’t get cover at the end of the process. Good for the adviser but can’t see the benefit for the consumer. I also can’t see advisers helping with claims for free. I have spent 15 hours + recently helping a client get the payment she deserved. In the future, I will pass on the name of a good lawyer and wish them luck.
lawyer will take 30% – 40% of the benefit payment. The rich getting richer, the poor get the picture. Will happen under either arm of political persuasion
Purple Bricks are losing money. It is debatable whether their business will endure.
purple bricks will go bust all the agents are leaving them
Turn off our grandfathered income and we stop taking the calls and small daily requests of over 8,000 clients. We would love nothing more than to turn each of those tiny commission payments into real fee for service clients….however most of them cant afford our minimum fee. So how exactly will all these clients be better off?
They’d save on advice fees. 8000 clients that is shameful. How many advisers do you have?
Do you receive calls and small daily requests from all 8,000 of these clients??
Heard that before… from the same advisers who switched investment options for clients without advice and authority just before MySuper was going to turn off their advice fees/commission they collected for no service.
“But clients can call us….”
More evidence as to why the industry is getting grilled.
Be better off as they aren’t paying an ongoing fee for small requests they can get processed for free by contacting the product provider directly.
The issue is that clients are paying for zero service. Cut the crap and enforce service and disclosure — problem solved. Does it really matter whether it is a commission or fee otherwise. I think the real issue is that many may lose the client once the details are disclosed and the client asks where was the service in the past. why change something that works, just be upfront about it all.
“I think the real issue is that many may lose the client once the details are disclosed and the client asks where was the service in the past.”
Exactly, you shouldnt be getting paid to offer no service. Its quite simple. Charge an hourly admin rate if need be but reality is most clients wouldnt want to pay the ongoing commission if they had the option as they get slim to no service for it.
Exactly David. Just make it full disclosure no matter the source or tenure and bring all rem under opt-in. Simples!
25% of respondents are lying to themselves.
So when the business consultants argue to sell off your tail because all those annoying phone calls and service requests are choking your business are they lying to themselves too ??
If you actually service those clients, you can just charge them a fee.
A commission is paid to sell a product, its a simple as that.
We do. It comes in the form of a servicing commission.It is as simple as that.
Except, that under your model the client doesn’t have the option to opt out of paying you?!
What…..and a Fee for Initial Advice paid from the invested monies once applied to a product is not payment to recommend or ” sell ” a product ???…… you absolute goose!
No I am not a goose. Your claim that any fee deducted from any product must be to sell a product rather than to fund the servicing of a client is your opinion and inconsistent with my experience with clients over 20 years. It would be interesting to understand what exactly you do for your clients and what fees you charge so we can offer our opinion on whether you are in a position to make your self righteous claims.
Never said it wasn’t, don’t charge from any products. Invoice clients for SOA directly and whether a product is recommended or not is irrelevant.
If your advice is strategic and does not involve a specific product recommendation then you should absolutely charge a fee separate to a product. That is a completely different offering to an adviser that recommends an investment product and the client wants ongoing advice and service on that product. Thanks for clarifying the source of your comments which confirm you have no idea of the time,costs and value associated with assisting clients in products on an ongoing basis.
The initial [b]advice[/b] fee should be payable whether the client implements it or not?! If your client wants to implement and wants and decides to deduct their fee from their investment balance then so be it.
(I think you better check your own long neck in the mirror)
Correct, the mouse.
Yeah right ! just like the reduction in insurance commissions was going to help clients. Premiums have gone up not down. Why is everyone so blind ?????
Agreed, BUT will only benefit the client if the fund/product provider physically rebates the commission back to the client. Otherwise the product provider/fund gains the windfall and the client ends up being more out of pocket. Also CGT consequences need to be considered if product was to be moved and there is also the issue of Lifetime Annuities whereby commission cannot be rebated back to client account, yet client may still utilise adviser services and may have limited financial means to pay a fee for service. Cookie cutter approach won’t work.
Negative effects on banning grandfathered trail commissions – In the UK they decided against it. An extensive review by Oxera in January 2015 documents the negative effects of banning commissions as ” the ban was not seen to be an effective solution to the problem being addressed” and “there was concern that a ban might have undesirable effects on consumer access to financial advice and products”
ASIC even acknowledge that all the changes will make advice to consumers more expensive. Refer to Point 58 in ASIC’s submission to the RC on Financial Advice. The proposed solution to this problem – is disturbing. ‘simplifying financial products’ & ‘restricting access to more complex, riskier products’. All in the effort to reduce consumer demand for advice.
So much for ‘do no harm’ from our regulator.
ASIC in it’s submission to the RC (refer Page 3 footnote 20) and in RG 246.212 (refer Note 1 under 246.212) acknowledge that banning grandfathered trail commissions is a breach of s51(xxxi) of the Australian Constitution.
So ASIC will keep saying & pushing for it but will not do it. Instead expect pressure to be applied to product providers to make the decision themselves, leaving them responsible.
In order to acquire property rights there needs to be just compensation. In other words a buy-back.
This is exactly why BT & Macquarie have turned them off for salaried advisers only.
ASIC wants to breach the Constitution but can’t. Stay tuned.
This is a BRILLIANT summary! Thank you and I really hope you work at Maurice Blackburn? I think we could use your services. Everyone knows (those who know anything, that is…) that clients will not benefit from reduced costs by doing this.