The AIOFP has written to its members today warning that the proposed changes to ban grandfathered commissions may not be constitutionally valid.
“Previously, as part of the Future of Financial Advice (FOFA) debate, consideration was given to banning commission structures,” the AIOFP statement said.
The association noted that Opposition Leader Bill Shorten, in his capacity as then assistant treasurer and minister for financial services, noted in the Corporations Amendment (Future of Financial Advice) Bill 2011 Explanatory Memorandum that “the proposal to ban particular remuneration structures can only operate prospectively, due to constitutional restrictions concerning acquisition of property”.
“Since 2011, the constitutional restrictions on the acquisition of property (other than on just terms) have not changed. Further, the FOFA reforms explicitly preserved pre-existing remuneration structures,” the AIOFP said.
The AIOFP is taking legal advice in relation to a potential challenge to the validity of proposed amendments to remuneration structures without any compensation to members, given what it has labelled the “radical change” in the Commonwealth’s position and its stated legislative intention.
The association, which represents members of the non-aligned financial advice community, estimates the cost of challenging the government in the High Court of Australia will be between $1 million and $1.5 million.
AIOFP executive director Peter Johnston said the action will send a clear message to Canberra that the advice community is prepared to fight against injustice.
“We have had enough of politicians either not bothering to understand the nuances of our industry or considering financial advisers as easy low hanging fruit to exploit for political opportunism,” he said.
“At the moment, both sides are feverishly and blindly rushing to legislate against grandfathering without realising it will only give higher profits to institutions, financially disadvantage consumers and crush small business.”
Mr Johnston believes institutional-aligned lobbyists have cleverly “spun grandfathered revenue into a fictitious story”, one where the money is sourced directly from consumers and should be returned to them.
“This is yet again another attempt by the institutional lobby to starve advisers out of the industry,” he said.
“This time they have gone too far, the advice community are prepared to aggregate their resources to fight them in the trenches if we have to.”
Mr Johnston confirmed that the association appointed an international law firm and constitutional QC to manage the process.
It is understood that about 50 per cent of AIOFP members are wholly reliant on grandfathered commissions.
[quote=Anonymous]There has been no recommendation at this stage to remove risk commissions. It has been said that is an ideal end game, no actual proposal outside LIF.
This article clearly articulates taking legal action against the gov for removing grandfathered commissions.
Its like teaching Kindy children in here.[/quote]
Well you’re a moron… no one is debating this articles on one point, if you actually read the comment above you’d see he said it’s a precursor to insurance removals which yes, they are talking about and let’s be real they will remove granted over a little time.
Next time don’t degrade people because you just want to seem important or smarter then someone else.
No, thats a strawman argument. Commissions on risk and grandfathered commissions on super/insurance are two entirely different things.
Theres a justification for one (risk) and no real justification for the other aside from being forced to keep the product for centrelink reasons but even then commissions are easily rebated and a suitable fee arrangement put in place directly with the client (if they actually get serviced and receive value).
Its just, as usual, being used as something to complain about in this industry. If everyone is so sure this is the precursor for risk commissions going in the not too distant future, perhaps it would be prudent to use the time to adapt businesses accordingly rather than spending time complaining.
People need to stop saying it’s complaining. It’s merely a forum to discuss and express an opinion or concern.
You know what’s funny [b]everyone[/b][u][/u] is doing something about it and are being prudent. Sure I’ve heard lots of talk (not complaining) about these topics but what would you suggest? Everyone just keeps their mouth shut and do what they’re told? Very practical way to deal with things isn’t it?…
Not sure what world you’re living in but no one is complaining about it 24/7 to the point where no work is getting done?.. I mean you literally wrote a complaint about complaining in the same time we’re all discussing the actual topic.
Kind of stupid don’t you think?
Great to hear and its a shame we don’t see anything from the FPA or AFA in terms of fighting for customers and advisers.
This is not just about grandfathered commissions it’s about risk commissions too which are in the spotlight and are and will always be a better option for the customer.
I don’t personally have any grandfathered commissions but this is about a government and regulator who have not nor ever do proper research into the issue as a whole before making knee-jerk decisions which ultimately benefits the big end of town and drives more advisers to the wall.
FOFA, LIF FASEA, Grandfathered Commissions, Risk Commissions. ALL enacted without ANY research on effect vs. customer benefit. ALL benefiting the very same big end of town at fault in the Royal Commission.
It feels to me that the whole point of the argument here is being missed.
Commissions were put in place so that the providers could drive business to platforms as a distribution channel. Platforms did this through paying commissions to Advisers and therefore reduced their own overheads because they required less of an investment into their own sales channels.
The result of this was product providers paying Advisers to deliver them clients.Clients invested their money on the platforms and platforms collected their fees through charging clients.
The reason that the eco-system existed this way was because it was more cost-effective for everyone involved.
For those that are championing the fact that product providers are going to rebate the commissions to the client… you are aware of how they have managed to achieve this right?
They don’t have the legacy costs of running their own distribution channel – and their “sales team” is being cut-off because the regulators don’t like that model any more. Clients are naturally going to get a cheaper product because the regulators have just cut a bunch of overhead costs for the product providers – who ultimately are happy because now they have enough volume that they don’t need the distribution channels as much as they once did.
That product is only going to remain cheaper until the other mechanisms that are required to keep the machine collecting FUM start to kick in. We instigate the best interests duty, platforms adhere to that, Advisers direct clients to the ‘best’ and the client pays for that advice.
Ultimately, the client is paying, and the platforms win.
This isn’t about the clients.
Well said.
Given that part of the payment for a FP business includes these commissions at a multiple – is it fair that people should just lose that and retain the debt they are in? I know everyone is saying bad luck move forward but say you bought a book to get started given dealer groups are charging flat fees and all the costs to run before you even get a client in the door. Isn’t this just another way to crush small business and have the banks win who can finance these businesses? Lets face it they will pull out when they see FP businesses not profitable but then if that is the case no one will be. All I see is dealergroup fees going up, PI cover going up and Xplan and the like not going down! I think this will destroy alot of small businesses and stop new businesses.
FP books are not an annuity financial product. They are a business, subject to the vagaries of markets, clients, and regulatory change. Plenty of people who bought these businesses have lost their grandfathered commission revenue anyway because the client switched product or switched adviser.
Anyone buying a FP book needs to do lots of due diligence beforehand to make sure the clients have been regularly serviced, client files with current contact details are provided, and the seller is not likely to poach the clients back. After purchase they need to do lots of client retention work, including switching their clients to better products and converting them from commissions to fees. Those who don’t will lose their revenue stream regardless of regulatory change.
I thought this was an article on the Shovel.
There are lot of great advisors out there but no justification for grandfathered commissions.
Many years ago I worked in a call centre supporting advisors who’d sold endowments, whole of life and every other type of rip off product you could think of. Most would only ever call their clients if they thought about cancelling. It was a disgrace.
You are old.
Grandfathered commissions are a joke. Like selling life risk insurance is rocket science. fact is the oldies never provided any ongoing service and even if they did it would have been totally superficial and purely to get more money from the client and their family and friends. Get rid of all these old codgers.
This is great and a nice little heads up to the FPA for doing ummm errrr not much! This is not about just GF trails. Its about standing up for who we are and what we do. On average most businesses have about 15-20% GF trail and it seems to be declining each year. However if as an industry we just give this fight up, the next without a doubt will be risk commissions gone, further compliance, education etc… We have toothless bodies in the FPA and AFA, hence why this is brilliant, a fight not just for GF trails but to show Canberra that we wont be bullied or dictated too. Every adviser needs to stand up and write to their local MP about the injustices we face which will ultimatley punish the consumer. This will be a world where only the wealthy could afford to pay for advice…
Too funny AIOFP. Frydenberg has already legislated ASIC with the authority to find ways to cease trail commissions by 1 Jan 2021, no later, one way or another.
So King Canute, go and fight against the tide coming in. Let’s see you take on the Commonwealth.
Meanwhile, Open Banking and Fintechs are preparing to steal your lunch.
Now, if your time and resources are limited, which of the two issues will you focus on?
Make no mistake, this is a litmus test. Clients, employees and business partners are watching.
I’m hesitant about wading into this debate because I think it’s probably more dangerous than getting involved in a land war in Asia (or going up against a Sicilian when death is on the line).
I don’t want to get into the politics or personalities of the people involved but I do want to draw your attention to page 52 of the final report. This is where Commissioner Hayne addresses the specific points
[i]”Whenever change is mooted, someone will suggest that changing the
permitted forms of remuneration would lead to constitutional difficulties
because it would amount to an acquisition of property otherwise than
on just terms. As I said in the Interim Report, two points must be made.27
First, where would be the acquisition? Who would acquire anything?
What proprietary benefit or interest would accrue to any person?28
Second, if the point is good, it was good at the time when most forms
of conflicted remuneration were prohibited. Yet no-one sought then
to challenge the validity of the relevant provisions and the Future of
Financial Advice (FoFA) ban on conflicted remuneration has now
operated for more than five years without challenge.[/i]
my understanding they stopped paying commissions on any new contributions eg CFS created two managed funds one on pre FOFA with commissions and a new managed fund the exact same but without commissions. this allowed transition
Was it not the case that FOFA only served to eliminate future potential income or value rather than eliminate existing or current income and current value ?
The existing value or property was allowed to continue.
It would be impossible to place a value on the potential future income stream of a practice and then claim that an acquisition of future property had occurred.
The current proposal is in fact an acquisition of current and existing pre-FOFA income and business value.
I do not believe it is case of having to prove that a proprietary benefit or interest would have to accrue to any person. It is simply a case of a deliberate change in legislation by the Commonwealth would effectively deprive a party of existing property and as such fair compensation should be paid for the deprivation.
The term property extends to both tangible and intangible property and so it could be assumed the rights to continue receiving the income from pre-FOFA commission is intangible property.
Appears a waste of time and money. Need to accept and move with the times
Its amazing re negative views on commissions.. they all sound like lawyers, public servants (basically everyone else who is not a planner).. they are good lecturing and telling the rest of us that we are wrong…
It’s staggering to me that so many seem to be missing such a fundamental concept.
The Royal Commission determined that the client has no legal entitlement to any kind of service when a commission is paid. Now I know that many advisers do provide service to their grandfathered commission clients – this is beside the point. The logic is simple. If you’re paying a fee and don’t have any rights, then legally this is wrong.
The only way in which you are going to keep your commissions is to argue that clients should be legally entitled to service, which defined by ASIC is at a minimum an annual review. To argue that you should be able to keep the commissions and not legally have to provide service is just wishful thinking. It’s not going to happen.
Anyone relying on grandfathered commissions for revenue is a fool, more so if recently bought a book.
Can’t believe all the whinging, just adapt and do the right thing by the client for a change, invoice for the appointment when you see them.
Starting to sound like the poor old mortgage brokers, these changes should have happened a long time ago and time to start looking at a lot of other industries with similar revenue tactics
Peter – I think what you are proposing makes a lot of sense. Our business would NOT in any way be impacted by the proposed changes to Grandfathered commissions BUT as stated previously this is the thin edge of the wedge. Peter if your statement is proven to be correct (“the proposal to ban particular remuneration structures can only operate prospectively, due to constitutional restrictions concerning acquisition of property”.) then it should be a case that the AFA and FPA join with the AIOFP in a united front to (if necessary) raise “whatever monies are required” from the membership bases to knock out the whole issue of retrospective change to commissions and restore some semblance of stability back to our lives.
We done Peter, really we have all had enough !
Really grandfathered commission banning will solve everything ?
We have any voice and are just getting steam rolled on everything
Doubt any other industry would have put up with this
Well done AIOFP. Put pressure on the regulators, and hopefully the other associations will slowly wake up and lift their game.
Enough is enough, the scrutiny has got stupid now.
Sick to death being told about ethics then Fasea (Freaking Arrogant Senseless Errorred Administrators) is funded by the banks and stacked with education providers not sure how this is ethical… sick of the crave outs get rid of commissions for advisers then introduce intra fund advice and mysuper advice. Industry funds are allowed to take adviser fee’s out the funds but external planners cannot. Clients have only had choice of super funds for only a couple of years… QSuper only 2017 let the members change because the law forced them too.
also considering they moved about 3 years ago on have degrees Qaul to get for jobs I think the banks knew something before the rest of us….
You like my FASEA term ?
“It is understood that about 50 per cent of AIOFP members are wholly reliant on grandfathered commissions.”
What the hell? I though the AIOFP were all about independence and no commissions?? Also I don’t know one business that is [b]wholly[/b] reliant on grandfathered comms. Is that a typo?
Independence in the sense that the members are self licenced.
A lot of things dont add up with that statement… Any business currently reliant on grandfathered comm to keep the doors open is a broken business. There has been years and years to transition to a real business model.
TIME TO STAND UP! Ok everyone this is our chance to actually stand together. This is alot deeper than GF commissions and goes to the heart of how advisers have been bullied, slandered, blamed for what the banks have done with their advisers, and screwed over by the greedy banks and ASIC. If you are not willing to get behind this then stay with that spineless group of bastards called the FPA who has sold us out for years! BTW I am not an old fossil and still have 25 years to go in this industry so I don’t want all the IFA’s to be forced out.
Agree totally, this is not just about GR.
Whiteout fail every problem in the industry is ultimately twisted towards Advisers as the problem and let’s beat the Advisers around the ears again as they are the lowest hanging fruit.
Eg, how do All the institutions Bank / Insurance CEO, Executive Boards, Superfund Trustees, Govt bodies of ASIC, ATO, APRA, etc all avoid FASEA ?
Blind Freddy knows the ALL have zero ethics and that was clearly shown at the RC. Yet not one single Bank / Insurance CEO, Executive or Govt body rep will do the Ethics course that ALL Advisers must be made to do.
The Ethics problems starts at the Top of the tree and these Bastards must be made to comply.
So yes it’s a much bigger fight than GR.
And this deserves a stand.
Mind you GR should be made Optin / FDS like all other revenue, then there is no argument of evil Comms for no service.
Go check out Tim Mackay’s twitter for his ill-informed, biased thoughts. He has the only opinion that matters in the industry so lets just do what he says.
WOW, he really must have so much time on his hands. He must also have a compulsive disorder. I can’t remember what I had for dinner but he remembers everything about a group he says is a waste of time. Sounds like he has a lot of time to waste!
The good news is that seeing as the AIOFP has over 5,000 adviser members, it would only cost $300 per member to raise the $1.5 million required.
A member levy will be required, because loans from the Income Opportunities Fund are a bit harder to come by these days.
[quote=Anonymous]Seriously, let go. Imagine being a consumer watching this. It would drive me away from the industry.
There is the argument to keep risk commissions but absolutely no argument to keep any other commission in financial planning.
We will never be a profession with the fossils fighting for this in the industry.[/quote]
So what are you saying genius….anyone that takes commission for the work they do isn’t a professional? I hope comment that isn’t directed at risk advisers like myself as I can assure you, my clients would strongly disagree with you!!!
Did you even read what I wrote…?
I said grandfathered commissions. I clearly said [b]keep[/b] risk commissions.
We have been ‘transitioning away from grandfathered commissions on super/investment’ for years now apparently. Its nobody else fault if some didn’t bother to do it as its less lucrative to charge fees for actual services rendered.
Finally someone with some balls to take on these corrupt morons. Thanks for nothing FPA
While I do applaud the AIOFP’s representation of their member base, I do wonder how many people will actually be affected by a removal of grandfathered commissions on investments only?
I agree that grandfathered commissions do not necessarily lead to bad outcomes for clients, but as a business owner wouldn’t you try to step away from it?
We have been in this environment for many years, surely all advisers saw the writing on the wall and opted to rebate commissions and charge an adviser fee instead?
So many questions…
Young Adviser, The issue goes further than just investment g/fathered commissions. If you let the bastards get away with trashing the corporations law doing this then RISK commissions are next in line. Give the buggers an inch and they’ll take a mile as the old saying goes. Nipping this in the butt NOW will stop any irrational exuberance these self absorbed pollies and special interest groups may be mustering as they whip themselves up into a commission extinguishing frenzy. These people have not the slightest inkling of how our industry works, how clients perceive things or how to protect client best interests. Politicians should be abjectly ashamed of themselves on this issue.
.
[b]THANK YOU Peter Johnston[/b] – all power to you! P.S: Young Adviser, regardless of what others with an agenda may say, risk-only clients will NOT pay fees out of their own pocket. I am speaking from much study, practical field tests over 5 years on this and 33 years in the industry. [u]Let me make this clear beyond doubt:[/u] [b]Clients will NOT pay fees for pure risk advice when there is no cross-collateralization with investment fees.[/b] So, no, risk advisers did NOT start charging fees for pure risk advice be there writing on the wall or not. Investment advisers, perhaps a different story. I am a risk writer.
Well done Peter about time the industry pushed back HARD against these Authoritarians
In the case of insurance, Commissions are a ‘loan’ from the institution to the adviser for placing the business with them.
If commissions were to cease the client would still pay 75% of the premium PLUS whatever the advice and implementation fee would be. Big upfront cost.
So in this case, commissions can be a good thing for the client – but ONLY IF:
1. They are the same across all Insurers.
2. Lapse rates in first 5-7 years of policy commencement are low.
3. Advisers are not incentivised (by other means) to place business with particular Insurers (as this mucks up condition 2).
4. Insurers do not abuse (2) by jacking premiums up after the 3rd or 4th year.
Lapse rates have been affected by:
– Churn – this has also been affected by the rise in technology and ‘best interests’ focusing on ‘best deal’.
– Transient management teams focusing on profit margins (4) and risk specialists (3) – how much is [b]true [/b] new business???
The distribution system is not working, and it is starting to show in the products. The commissions discussion is only one part of a larger issue.
Go hard Peter. You have our full support
What a stunning and embarrassing lack of awareness from this group. Great way to bring regulator focus to your members. If so many of your members are so heavily reliant on commissions, they are doing it wrong! Would they stand up to intense scrutiny from ASIC? I doubt it. Classic own goal.
Do you know where these inbuilt commissions go if are are turned off? They stay with the product provider…They will not go back to the consumer…DUMB argument.
They will be rebated back to the consumer, the adviser can then charge a fee if they can justify
Wrong the banks, insurance, investment Institutions keep them. And then the client has to pay an extra adviser fee.
Wake up sunshine and smell the institution BS.
Dumb is making arguments while ignorant. Let me help you out. Google the govt direction to ASIC dated 21/2/19. F2019L00204. The line of argument that product providers will keep the trail is gone. ASIC have been directed to investigate “passing the benefit of ending payment of grandfathered conflicted remuneration on to clients, whether through direct rebates or otherwise”.
You really think a product provider will risk their license by taking this opportunity to keep the trail?
Suggest you broaden your source for talking points beyond the echo chamber of the likes of AIOFP and other ostriches with their heads in the sand.
Are you saying ASIC would dare take the licence away from a CBA, NAB etc. Let me know when that will happen.
Exactly the institutions will pocket it and let a toothless ASIC who has been proven to do nothing let them keep it.
Let me know if ASIC ever wake up and stop being owned and run by the banks
So if the product providers all agreed to rebate the commissions back into the client’s accounts would everyone remain so offended by this change? I suspect this would quickly provide clarity around the genuine intent of this whole argument, and potentially unmask a greater degree of self interest than anything to do with acting in client best interest…
Yes, they would remain offended as they would actually need to justify the clients paying them a fee directly and opt-ing into that fee ongoing. If their service is ‘call me if you need me’, the clients wont pay a fee. That is the true reason you see people up in arms here… Ive already clarified with various product providers they will be rebating commissions for any clients we have stuck in old products for centrelink reasons… Its one big non-event.
Not really, Anti-SMH. A major institution is closing their commissioned super product, and moving all grandfathered clients to a new super product that has no commissions and is way cheaper. Centrelink-grandfathering isn’t affected as the new fund is a ‘successor’ fund. Clients to be moved to closest matching investment option. Nothing prevents them from getting advice.
To put it simply. The institution decided to close one product and move clients to another. Client not worse off.
The world is moving on….
Did they have to provide an SOA and comply with BID too????
If you were doing the right thing by your clients, they wouldn’t be in an expensive commission based product to start with..
Why do you assume all commission products are more expensive?
I hear some arguing to simply turn the commission into fee – well, there has been no point until now – so I will.
Product provider could have moved the product to a successor product but guess what, many didn’t and somehow that is the Advisers fault.
You might say, well move the client. It typically costs money for the client to move and other CentreLink/CGT issues etc have meant it is better for the client to stay in the old commission product.
There is no way anyone will be charging any client the same rate as the old commission as the costs to serve with a new SOA, opt-in etc mean more cost.
I would have no issue if all commission went (over a reasonable period of time and give advisers some help/relief with CGT/CentreLink issues) but, to allow the Super providers to maintain a business model via Inter fund advice (which is internal commission) is just highlighting the fact that the real target is Advisers.
So tell me, what product advice will Australian Super give you?
And the world works on no one paying for anything.
Yeh sure wake up dreamer.
SMH, clearly you are not that close to the industry. ASIC is going after every single adviser as we speak so no risk of additional trouble – ASIC will simply change the rules and audit back ten years. I saw a client this morning who was commission. I will turn it off and do a fee but you are aware, the client will be worse off?
Look we all know thats not true that ASIC is going after all Advisers. They have neither the time nor resources for that. Congratulations on doing the right thing by your client.
SHM, I will put this as kindly as I can, you are extremely misguided. I’d like to put this more strongly but if I write what I want to, to you, I will be censured. Wake up.
Where am I wrong? Bring on the talking points. FoFA was 2012. Advisers have had 7 years to do the right thing. If they aren’t ready by now to move toward professionalism, they never had any intention to. Just imagine if the general public viewed the commentary here from advisers clinging to a bygone era. No wonder so few Australians seek advice.
[b]What a stunning and embarrassing lack of awareness from this group. Great way to bring regulator focus to your members.[/b][i][/i]
very selfish attitude and it’s people like you that makes this industry fragmented.
Simple. Have them purchased at an operational cost by the funds at market rate (somewhere between 2-3 times reoccuring revenue). There you go, just fixed your entire issue in 10 seconds. This way those that borrowed to fund the purchase of books can pay out their loan and clients are not adversley impacted. However, as the clients have now been purchased any administrative work required on the client should be done by the institution to avoid the clients being charged a fee by the adviser for helping out.
Even better, write to the clients and ask them to opt-out of this process and keep their adviser without having the trailing commissions purchased. Anyone who opts-out stays gradfathered, anyone who doesn’t respond is purchased by their superannuation fund.
WELL SAID!!!! About time someone had the guts to standup and call out the crap that we have had to endure.
And by the way – I’m not saying that commissions should stay long term. The future is fee for service – so no left wing abuse please.
Commissions derived by FP practices is reducing, has reduced and will continue to reduce. That is a fact that ASIC, Mr Hayne, Politicians and stupid media just choose to ignore (or not bother to understand).
Seriously, let go. Imagine being a consumer watching this. It would drive me away from the industry.
There is the argument to keep risk commissions but absolutely no argument to keep any other commission in financial planning.
We will never be a profession with the fossils fighting for this in the industry.
Fossils????
If you were a 35 year old that has borrowed a $1,000,000 2 years ago to buy a practice in good faith are you considered a “fossil” ????????????
What a ridiculous stereotype and an illustration of the lack of understanding and empathy of this very serious issue.
No but you would be considered naive if you paid anything more than exactly $0 for trail.
Books of grandfathered comms went up in value after FOFA because advisers felt that it was better that they didn’t have to do opt in and FDS for these clients. So one could easily argue that maybe you shouldn’t have paid a higher premium just so you wouldn’t have to do work.
Having said that, I don’t think getting rid of grandfathered comms is beneficial to anyone other than product providers and is quite likely against the constitution due to acquisition of property without fair compensation.
So you don’t think clients receiving the value of the comm benefits them?
I’d suggest you are a fool if that is what you did. Writing was on the wall a long time ago the gold bracelet wearing and Mercedes driving advisers (life salesman) was grinding to an end point
“Good faith”…? Why on earth would anyone have bought a book of grandfathered commission clients unless the appeal was no opt-in/ FDS which is essentially the lack of need to actually service clients to get paid.
Consumers shouldnt need to keep paying for bad business decisions. If clients are engaged and receiving value, they will pay a fee instead. If they aren’t receiving value at the moment, you shouldn’t be getting paid anyways.
It’s a good headline but let’s not get ahead of ourselves. The AIOFP are “taking legal advice in relation to a potential challenge”. So they’ve had a conversation with a lawyer. Representing their members as they should. FPA please take note.
By the way, AIOFP members must do alright if they can take a week off in late June for their overseas conference this year. How many financial planners would leave their clients for a “conference” just before EOFY?
Probably only successful advisers with great business models, and good relationships/understanding of their clients needs, forward planning, support staff and systems in place to allow a business owner the time to network with peers.
Obviously the ones that give client service and know their clients !!!! Ever heard of email ?????and I am low tech .
Section 51(xxxi) of the Constitution of Australia provides that the Commonwealth has the power to make laws with respect to ” the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws”.
It is both a power and a constitutional guarantee of just compensation for property rights contingent on it’s exercise.
The acquisition of property must be for a Commonwealth purpose.
Changing existing legislation is for a Commonwealth purpose.
If the Govt (Commonwealth) impose legislative change which as a direct result of that change deprives a person of existing property then fair compensation must be paid to the deprived party.
The arrangements offered must be deemed fair or such that legislature could reasonably regard them as fair.
Interestingly, the judgement of fairness must take account of all the interests affected, not just those of the dispossessed owner.
This may suggest that clients who are also disadvantaged as a consequence of legislative change, may also be an affected party and may have a right to fair compensation for their loss.
At last an Association fighting for its members (and clients). And for those of you saying commissions are dead for your own personal gain they are not and neither should they be. Outside of high net worth customers getting their risk advice as part of their overall portfolio and being charged a fee I have never had anyone able to convince me that risk commissions are not within the best interest of the customer to get good quality risk only advice. The simple answer is that risk commissions are in the best interest of the vast majority of customers to get risk advice vs. direct junk.
If you think banning grandfathered commissions wont be a prelude to getting rid of risk commissions you are also dreaming. It has to be stopped before all but a few financial planners charging ridiculously high fees are left and the average (non high net worth customer) wont be unable to afford to get advice.
Nobody. Is. Talking. About. Risk. Commissions.
Grandfathered commissions/fees on super/investment should have been gone years ago. Be thankful you could received those fees for no service this long.
If you service these clients, you can replace them with an appropriate fee.
If you think this isn’t the thin end of the wedge the to paraphrase Darryl Kerrigan “You’re dreaming”
While I agree with you that you should charge a fee and grandfathered commission should be gone…
They. are. talking. about. removing. insurance. comms….
Haha no they arent. Read the article. Read the RC recommendations. They are cutting off grandfathered commissions (risk is not grandfathered).
Seriously fear for some clients with the lack of basic reading comprehension from many advisers on this.
You have compartmentalised yourself to this one issue. They very clearly spell out the removal of risk commissions in the report.
There has been no recommendation at this stage to remove risk commissions. It has been said that is an ideal end game, no actual proposal outside LIF.
This article clearly articulates taking legal action against the gov for removing grandfathered commissions.
Its like teaching Kindy children in here.
The RC VERY CLEARLY TALKS ABOUT THE REMOVAL OF RISK COMMISSIONS so don’t bury your head in the sand. We do need to be standing up for this industry NOW,
Really. I am an adviser and have been for 19 years. Get off your high horse and spend some time looking after your clients instead of yourselves.
You utter hypocrite.
You are suggesting that advisers who have clients in grandfathered commission products because it is suitable to their current needs and strategy and are cost effective are not receiving appropriate service.
Who are you to judge ?
You look after yourself Alan by looking after your clients.
The more you look after your clients Alan, the more you are looking after yourself….or do you run a charity?
If you don’t look after your clients they will leave you irrespective of whether you are remunerated via commission, account based fees or direct fees….simple as that.
This whole ridiculous ideological debate regarding the basis of remuneration has become a feeding frenzy for the Church of Direct Adviser Fees congregation.
They feel all warm and fuzzy and comforted by the fact they are a band of followers who believe in a singular guiding light and can ask for forgiveness because they don’t charge commissions.
What a complete load of bullshit.
Have a look at a few of the churches recently!!!…they seem to be doing exceptionally well !!
Just give it up. Commissions are dead and rightly so. If you can’t replace the lost commissions with an advice fee and justify it to the client then you shouldn’t be receiving those fees in the first place. This industry needs to stop fighting for the status quo because the status quo is inherently corrupt.
This isn’t about Grandfathered commissions, this is about being bullied and mistreated. if the Government is allowed to flout the law to achieve a political end, what or who will be the next victim?
by all means ban all future investment commissions. but to allow this kind of cavalier attitude to proliferate is bad news for the entire Financial services community.
100% about being bullied out of an industry for the benefit of big banks and union funds profits.
Grandfathered commissions should be banned, full stop. Time to get real, the new world of financial planning where people are lining up to get advice and waiting for months for an appointment is here, they are itching to hand us over adviser fees and engage on annually. Financial planners are now the most respected profession and are rightfully taking their place as the family doctor for finances.
Next, insurance commissions should be nil.
Those Mortgage brokers who are order takers and do not add any value should be the only ones will commission breath!
just so long as your business model works, to hell with everyone else. do you even the slightest inkling of how banning Risk Commissions will affect the ordinary everyday Aussie who can’t and in most cases won’t pay a fee for risk advice?
Yeah Doctor I’m pretty sure we are not the most respected profession…….but hats off for trying. Commissions on investments yes, but risk is very hard. Let’s be honest if it gets banned tomorrow premiums will not drop by 30%
Well done!! NOW FINALLY someone is talking common sense! Let’s all get behind this as it will only help the adviser community as a whole. WE advisers are ALL sick of being trashed and smashed by what is the banks/FSC continual greed and lying that only hurts us and our clients in the long term.
I’m not a fan of commissions for investment and super. Nor am I a fan of the AOIFP and their members. But I am sick of the stupidity and nonsense being perpetuated by the media, politicians and vested interests on commissions. Mortgage brokers and the life insurance industry will be decimated if this bullshit is allowed to continue. Commissions allow smaller players to compete with the big institutions. It’s as simple as that. The institutions hate them, because they want smaller players out of the way. They don’t want to be held to account and forced to deliver quality product at competitive prices. How the ACCC has stood by and allowed LIF and the attack on mortgage brokers to fester into the RC outcome is beyond me. I wish the AOIFP well in their endeavors.
Who is this ‘annonymous’ person below who thinks Peter Johnston and AIOFP are a joke. Identify yourself and have the courage to debate the issue. Are you even an adviser?
I agree with Peter from AIOFP and all strength to them.
Beyond the sledging of Peter and the AIOFP doesn’t he make some highly relevant points? Is it true that 50% of AIOFP members are reliant on commission based revenue still?
“On Just Terms” sounds familiar, “It’s the Vibe, it’s Mabo”
It’s the Vibe? Riiightt. So are licensee conferences in Vegas, Vietnam and Hong Kong.
What a ridiculous echo chamber this is.
we should also go after the government for all the false and misleading information from asic and the fsc about churning and how they colluded with the banks and insurers to cut our commissions in half
Yep, ASIC’s press release following Report 413 should be exhibit no. 1. Kell’s appearance on ABC’s Late Business should be exhibit no. 2. No mention that the report was based on suspected churners (ie. advisers selected based on unusually high volumes of business, based on information reported by the life insurance companies). The media took ASIC’s comments and ran with it, painting the whole profession with an unfair, scandalous stench. And they still haven’t bothered to review industry fund behaviour where they charge fees for insurance without getting client the client’s consent or ensuring the cover is valid. There should be a class action on this. In fact I’m staggered it hasn’t already happened. It would be bigger than the ‘fees-for-no-service’ issue
we also need to sue ASIC, a class action needs to commence ASAP.
This guy and his organisation are a joke. He is trying to turn this into a small business Vs the institutions debate. The removal of grandfathered will not benefit institutions, the commissions will need to be rebated to the client so no extra profit for institutions and in fact they will spend millions upgrading systems to allow for this to happen.
Advisers who rely on commissions will have the opportunity to charge their clients a fee whilst not increasing the overall cost of the product and service. If their clients aren’t willing to pay that will be the test of weather they are earning that fee.
In many cases consumers don’t understand they are paying a commission to an adviser. Particularly in the case of employee super funds where there are commissions on members super balances and contributions being directed to advisers they have never met.
‘50% of the AIOFP members are wholly reliant on grandfathered commissions’. So they haven’t written any new business or advised a client to change products since FOFA?
I agree with you on employer funds, but this is a bit bigger than just grandfathered commissions, this is also potentially about insurance commissions and more importantly the law of the land and property rights.
This is smelling like socialism 101 and is just the first step, create a precedent and many other industries will be 2 steps behind us.
Mortgage broker trails will be next and then what.
You are wrong and a JOKE yourself. You obviously are not an adviser OR if you are an adviser you are a newish entrant with a smaller client base of HNW clients that all pay 1% for your advice and charge another fee on top for SOA’s, ROA’s, and even a fee to process forms and claims!! Under this model which I have seen many times, grandfathering is not an issue and those advisers just DON’T GET IT because they manage 100 to 150 clients and have net revenue of $1m to $1.5 mil. What they don’t see is all the small mums and dads in pension wind down phase and only $100k or $200k left and need allot of help and cannot afford to be charged a fee every time they call in for a withdrawl or change of circumstance. GET REAL MATE and open your eyes!!!
So your only argument is affordability for mums and dads with 100-200k?
The commissions that are removed from their accounts and rebated to them is a direct benefit to them. If they still require a lot of help they can choose to pay their adviser a fee. I think that is a pretty good outcome for the mums and dads???
The only way mums and dads would be disadvantaged is if that new fee was higher than the commission they pay. If the case this would suggest the commission earning adviser was somehow subsidising their service. Maybe they have other clients in the commission book that don’t get any service or value?
Therefore on the whole mums and dads will be better off because only those who need service will pay for it.
You clearly have no idea.
Industry funds…. tell your clients about them. Cheap and great service for mums and dads in pension ‘wind down’ phase.
ha ha good one
Spoken like someone whose dealer groups fees are subsidized by a major product provider.
Your wrong on many points. One, changing from commission to the same fee costs the client. Additionally, no one will work for the old commission rate as it no longer covers compliance costs. Two, you will find product manufacturers will end up closing these old products as they do not have the staff to service them which is why commissions were paid. Once that product is closed, I suspect the product manufacturer will follow the industry funds lead and simply charge every single member a fee for inter fund advice and deliver it to a few.
So, end result is the client still pays but now and an important point you have not considered, the manufactures no have the client back under their control and no more adviser moving clients to the competition. And guess what, you might even think it a good idea to help out and argue for centrelink grandfathering relief etc to help the process.
And to your other response below, it is about cost for small clients but they can now get that from the manufacturer paid for via inter fund advice – the biggest fee for no service issue by a mile.
Well done for helping the customer/manufacturer.
“the commissions will need to be rebated to the client so no extra profit for institutions”
Dead wrong Anonymous!. The fee rate is part of a legally binding contract between the consumer and product provider. Please tak some extra time during the legal studies section of upgrading your education to meet the standards.
It is you who is dead wrong Perplexed. Refer my comment earlier around Government direction to ASIC last week. There is no doubt the benefit of ending conflicted Rem will go to the client – it will be law. Are you suggesting the product providers will flout this under intense regulator scrutiny and risk their license to operate?
Please take some time to get up to speed. You are getting left behind.
Can you confirm and back up your statement that removing grandfathering will benefit all Australians. You must be a busy person to know everyone’s personal situation or just know alot about nothing.
I have the popcorn ready. Comments on this one should be entertaining.
Bravo to the AIOFP for having the guts to get it tested. Even ASIC acknowledged constitutional concerns within their submission to the RC.
Most commentators have completely forgotten the tripartite nature of commissions. They come out of a three way agreement or contract. Regulating one party out of the contract doesn’t negate the contract. Institutions / product providers will be well within their legal rights to retain these commissions.
The mistake of thinking advisers get these for nothing and do nothing for them only highlights the naivety of some industry participants.
Perplexed, its starting with that thought, that commissions are money for jam and are hidden, which is what all our detractors use to argue on. Instead of asking the actual clients, they assume that clients don’t want to pay commission and don’t know they are paying it, that’s all they are just assumptions. How many grandfathered clients got up at the RC and complained? None! Clients are not stupid, they understand whats going on. Simply assuming all grandfathered super commission clients aren’t engaged is just a way to put an argument forwards, its not actually based on any factual evidence.
Actually recent research buy one life office revealed that (in the case of risk insurance) 0% of respondents would pay a fee to receive Risk advice. the fee mentioned was $2,000.00 if one considers the cost of providing that advice and associated compliance documentation and managing the lodgement process would barely be covered by this fee, it’s no wonder many advisers are already walking away from providing stand alone risk advice, i suspect a similar result could be found for those who can’t or won’t pay for investment advice.
same structure how mysuper fee’s for advice work or intra fund advice but at least the client can meet the adviser face to face
Commissions are bad and must go ….We will install all recommendations of the RC …. Hang on mortgage brokers took out some Ads and said they will lose money , getting trail commisions for the life of the loan 30 years for what ??/ ….. Labour said ok , we will let them take commisions , this is now not bad ….We will not install all recommendations of the RC. I am a bit confused … Bring it on AIOFP . At least they are doing something for their members unlike the FPA !!!!!! Still waiting for the FPA to step up to the pate for members , life writers and old grandfathered commission advisers .