In a statement, AFA general manager for policy and professionalism Phil Anderson pointed to what commissioner Kenneth Hayne said on page 18 of the royal commission final report, where he didn’t believe there was any basis in arguing that there is a constitutional issue in banning grandfathered commissions.
However, he said there is clearly evidence to suggest that other legal minds have a different view. He referenced a media release regarding the Future of Financial Advice (FoFA) reforms from 29 August 2011, when then minister for financial services and superannuation Bill Shorten said:
“Following legal advice from the Australian Government Solicitor, the government has determined that the ban on conflicted remuneration (including the ban on commissions) will not apply to existing contractual rights of an adviser to receive ongoing product commissions.”
Mr Anderson said the FoFA legislation is littered with references to paragraph 51 of the constitution and the issue with the acquisition of property rights on other than just terms, citing sections 1528, 1530 and 1531 of the Corporations Act as examples.
“As further proof that this is still considered to be a relevant issue, this reference to paragraph 51 of the constitution was included three times in the Centre Alliance Party’s recently proposed amendments that were seeking to ban grandfathered commissions from 1 July 2020,” Mr Anderson said.
“There is clearly evidence to suggest that the banning of grandfathered commissions would create a constitutional issue, yet despite all the direct evidence that we provided in our interim report submission, the commissioner still proceeded in the final report to simply deny that it is an issue.”
Further, Mr Anderson said that, on 22 February, Treasury issued for consultation draft legislation on banning grandfathered commissions, and he found the inclusion of four new subsections stating that section 1350 would not apply in particular cases interesting.
Section 1350 states that compensation needs to be paid where property is acquired on other than just terms.
“It does seem remarkable that Treasury is proposing legislation that would seek to remove constitutional rights from financial advisers,” Mr Anderson said.
“The fact that within the course of two weeks, the Centre Alliance, Labor and Treasury have all brought forward different versions of proposed legislation to deal with grandfathered commissions highlights the extent to which this issue is entirely out of proportion with reality and the available evidence.
“The political momentum behind an issue that ASIC cannot provide guidance on the extent of and the evidence does not demonstrate any client detriment, is truly illustrative of a hunt for scapegoats and quick wins. We can only ponder as to why this has not been subject to appropriate scrutiny.”
Correct- It’s the VIBE!!!
This is just embarrassing for the AFA – they really should keep Anderson from speaking about things he doesn’t understand.
While an argument could be made that the contractual rights of advisers to collect trail commissions is ‘property’ as relevant to s51(xxxi) of the Constitution, the HCA has made it explicitly clear, that legislating to prevent someone from having or receiving something, or impinging their right to do something, is not the same as acquisition for the purpose of s51(xxxi) per ‘JT International SA v Commonwealth’ and ‘Cunningham v Commonwealth’. So s51(xxxi) doesn’t apply at all and the argument is nonsense.
Even if by some magic, the ban on commissions was considered acquisition of property, whilst it would be achieved via a piece of federal legislation (i.e. Corporations Act 2001), the power of the federalised Corporations Act comes from the states and territories delegating their powers to legislate for corporations to the federal parliament (because the federal parliament doesn’t have the power to do so in the constitution). This means that anything legislated in the Corporations Act, is done by the Federal Government, exercising the powers of the state and territory governments, who, under their individual constituting acts, are not required to acquire property on just terms. So again, s51(xxxi) doesn’t apply.
People that are not legal practitioners (or uninformed) should not opine on legal topics.
Thank you for your opinion on this matter…..but that is all it is.
Legal practitioners have been opining on Financial Services matters for the last decade with a clear and distinct lack of depth and understanding of their subject matter.
Dear Mr Anonymous,
Thank you for your contribution to the debate.
One of your arguments appears to be that the Commonwealth Constitution does not apply with respect to the Corporations Act, as it has been legislated on the basis of the delegation of powers from the states. If that was the case, then I invite you to explain the references to Paragraph 51 of the Constitution and the acquisition of property on other than just terms in Section 1528(3), 1530 and 1539(2) of the Corporations Act. I would also like to draw your attention to Section 1350 of the Corporations Act which also refers to Paragraph 51 of the Constitution and the acquisition of property on other than just terms.
Incidentally, On the basis of your suggestion that non legal practitioners (or uninformed) should not opine on legal topics that you would equally apply this standard to the Authors of the Royal Commission final report and that they should not express views on financial advice, where they clearly do not understand it or are uninformed. That argument goes both ways.
I would suggest that you read the full statement, as follows:
https://11-afa.cdn.aspedia.net/sites/default/files/uploaded-content/field_f_content_file/conflicted_remuneration_intermediaries_and_grandfathering_-_28_feb_2019_-_final.pdf
Regards,
Phil Anderson
can you post your name so we can all boycott you, you retarded turd.
[quote=Anonymous]Why doesn’t the product provider simply pay out 3 times revenue? This way those who have purchased books are not disadvantaged nor indeed those who have provided ongoing services to a self generated client. [/quote]
Yes. It fixes the problem. The client can then pay less fees. The business that purchased an asset legally can use the proceeds to retire the debt on that asset and the product provider that has gotten out of the RC without really being impacted can pay the cost. Consider it a community benefit payment for conning practices into buying revenue they always knew was under the spotlight from ASIC and for acting below community standards.
The other alternative is for the Government to pay 3 times to the practices. How do you think that looks to the public. Bill Shorten paying financial planners mullions of $.
Why would a product provider buy back a trail that they would just be turning off anyways?
Heres what couple happen:
1. Stop treating clients as property.
2. Product provider stops paying commission and reduces fee on product accordingly.
3. Adviser charges client fee directly.
Nobody is worse off. The only ones worse off are advisers that weren’t servicing these clients and they deserve to be worse off anyways.
Here’s the point on this.
If nobody is worse off – nobody is better off.
So what’s the point.
It ain’t that simple. The red tape associated with a fee is, in ASIC’s view and it seems the general public, so extensive and valuable that the fee is justifiable larger.
I just wonder why Industry Funds are allowed to charge everyone a fee for advice (Inter fund) which they deliver to only a few? Is this not a “fee for no service”.
And if the red tape associated with Adviser fees is, as is ASIC’s view, very valuable and there to protect the consumer, why would the general public tolerate absolutely no protection as is afforded under inter fund advice?
Industry Funds can now entice new members and provide inter fund advice with no up front cost to members – which is a very big competitive advantage. The cost is lack of protection for the consumer.
Perhaps you can tell me how no one will be worse off?
Remember when ” watch your back Shorten”, stabbed Rudd and then Gillard and then Rudd…and then……….whoever else was in his way to achieve his intended selfish goal?
Its not hard to understand that here is a man who would be willing to do anything at any cost in order to get to the top job.
Whoever and whatever he wastes along the way is not his concern.
He is a union headkicker remember. These people act and respond on the control of others through manipulation and power.
You can tell by Shorten’s demeanor of late….he is being managed to stay calm and considered, but inside he would be salivating like a white pointer around a seal colony.
This man knows only one way and if that means deliberately and intentionally going against his statements and the legal advice he received from the Australian Solicitor General in 2011, he would do anything and say anything.
This bloke is a street fighter and street fighters will use any dirty tactic to beat the living daylights out of their opponent.
get rid of commission is easy – what about the lost revenue that goes with it (income tax.. … company tax… gst,, tax from people employed who ultimately lose their jobs). Do these clowns really understand what damage they will cause. Just pathetic
The whole LIF , FOFA is a total sham. It unconstitutional to remove nearly 40% of ones income based on recommendations from people with no expertise, experience and knowledge of our industry. From Towbridge to Haynes the AFA woke up to late total reactive not proactive.
towbridge and hayne to older persons home NOW!
Why doesn’t the product provider simply pay out 3 times revenue? This way those who have purchased books are not disadvantaged nor indeed those who have provided ongoing services to a self generated client.
has to be paid back to client where practical
I totally agree. This was one of the basis I purchased a book of clients! I didn’t do so to be ripped off!
Personally I’d back Hayne on this one. He was on the High Court when it decided plain packaging for cigarettes did not breach the constitution and one would hope is pretty good on constitutional law.
Lawyers are paid to litigate the law so I am sure you will find many lawyers prepared to argue a ban on grandfathering is unconstitutional. I doubt though they will run this case on a no win no fee basis so another lawyers picnic.
However commissions have had their day. The optics of our industry running this case would be terrible. Time to get on with life and find a better way to get paid for what we really do.
Its simply unconstitutional to apply a retrospective law unless compensation is paid to those that the law affects.Its Fact!
Uber?
really – you idiot
Uber? The states have paid some level of compensation to taxi plate holders (NSW, VIC, SA)
$20K per licence (in NSW) isn’t much compensation
Commissions may very well have had their day, well unless you are a mortgage broker, real estate agent, ambulance chasing lawyer etc. What you fail to understand is FOFA set the scene that grandfathered commissions could not be turned off retrospectively. Business transactions have taken place on this basis. If the end result is grandfathered commissions are to be turned off, which seems likely (again not for mortgage brokers, real estate agents etc) then the constitution protects the property rights of those in receipt of those commissions. Those people need to be compensated, not simply told to get on with life.
Lack of experience in the industry may allow you to think this way and not helping thise less fortunate may not be a strength in your practice if indeed you have one? Also the plain packaging of cigarettes has done nothing to curb use.
I don’t agree with much of what Hayne had to say because I don’t think he knew that much (if anything) about the real world let alone financial planning. I would however have to accept he has a fairly good grasp on the constitution given his previous gig. I however still don’t see the point of getting someone who hasn’t worried about money for at least 20 years heading a review on financial planning.
Lack of experience in the industry may allow you to think this way and not helping thise less fortunate may not be a strength in your practice if indeed you have one? Also the plain packaging of cigarettes has done nothing to curb use.
If the legislation was to proceed and there was determined to be client detriment as a result of the legislative change, Section 51 (xxxi) of the Constitution of Australia also refers to ” fair compensation” and the judgement of ” fairness ” must take into account of all the interests affected, not just those of the dispossessed owner.
In that instance, the Government may then be subject to requesting evidence as to any detrimental financial impact suffered from individual clients of advisers across multiple grandfathered product lines and multiple platforms and across multiple companies many of which have consolidated business with new companies who have purchased or inherited legacy or older product lines.
A precedent has already been set by Australian Government Solicitor in 2011 stating the adviser has existing contractual rights to receive ongoing commissions and the FOFA legislation has identified that enforcing the banning of commissions would give cause to a property acquisition issue.
This is the reason why the FOFA legislation did not proceed with the banning of commissions at that time and remains the primary reason why this proposal will be significantly problematic and expensive for any Govt to proceed with and enforce.
If there exists a contractual right for advisers to continue to receive commission payment, then the proposed legislation may cause a breach of contract and a deprivation of property.
Neither of these outcomes would have been instigated or caused by the adviser, they would be caused directly by the Commonwealth following a deliberate change to legislation in the knowing there has previously been advice provided and accepted the grandfathered commissions represent a contractual right and a removal of that right would represent an acquisition of intangible property for a Commonwealth purpose.
Finally, all the funds management companies that are currently in the process of actively ceasing
pre-FOFA remuneration payments to advisers and actively ” encouraging ” clients of advisers through direct communication to turn these off or ask for rebates of commission payments, may be breaching the contractual right of the adviser to continuing receiving this remuneration under the current legislation.
The legislation has not changed, but fund managers running scared off the back of the RC are taking matters into their own hands as a public relations exercise and are effectively attempting to acquire or deprive the advisers of remuneration they currently have a right to continue receiving.
In order to avoid significant upheaval, financial compensation on just terms, the possibility of extended class action and dispute and potential client disadvantage, the issue of grandfathered commissions should be allowed to continue as determined under FOFA legislation.
As all advisers are governed by the best interest duty and must act in the clients best interest, if it is determined following analysis it would be better for the client to move from a legacy or older product, then it can be recommended and facilitated by the adviser.
As time progresses and clients needs change, age or die, the percentage of pre-FOFA product will rapidly decline to a point where very little will remain in place.
This is the sensible and considered manner in which the succession of grandfathered commission remuneration should be manged for the Govt, for the advisers and for the clients.
Without clear,concise and documented evidence that clients who remain paying remuneration to advisers via commission for advice are significantly disadvantaged compared to a client paying a fee for advice then the proposed legislative change has no basis.
Basing legislative change on ideology is negligent and will be ultimately destructive and costly to all parties, not withstanding the Govt who elects to potentially breach the Constitution by enforcing law directly causing deprivation.
WOW!! BRILLIANT SUMMARY!
Correct! Shorten and Hayne think that by yelling loud enough advisers will relinquish their grandfathered commissions into adviser service fees whereby no compensation could be paid. They are trying to hoodwink all advisers
Intra fund and Mysuper advice is still allowed go figure…. But fees for inter fund advice, charged to every single member with the clear intention NOT all members use the service. Sounds like, smells like and tastes like, Commissions and fee for no service but this time, by legislation and only for a few.
But are banks breaching contractual rights? They seem to believe that they are able to decide if they pay out that commission or not. I think this may come back to how the legal agreements in individual products are structured which is why CBA has only cut commission on one particular product.
At the moment….just watch…they are all building for a blanket ban and a pro-active and targeted
programme well before 2021 and well before any legislative change is or is not enacted.
They are an absolute disgrace.
F@#$K CFS and CBA! I refuse to use them and have for years. I am actively managing all clients out and any adviser who uses CFS/CBA is a fool.
Because the Big Banks and Insurance Companies will keep the Adviser Commissions for themselves and thus profit again at the Advisers and customers expense.
Surely it’s not hard to work out is it.
The Banks own and run ASIC !!!!
There is community opposition to the overly generous parliamentary pensions. Adjustments have been made for new politicians but the older politicians have retained their existing benefits. If the law allows for existing trailing commission to be removed – as opposed to banning new commissions as per FOFA- then the precedent is set to remove the overly generous parliamentary pensions irrespective of when they served in parliament. This is the argument that should be pushed.
So whats changed since 2013? Commissions are reducing, fee for service is increasing however this is just not good enough for the idiots running this country. What about making the advice process simple so that clients can be upgraded fairly, quickly with minimal cost.. the people running the show don’t understand this
I’d it really such a difficult notion that property rights in a liberal democracy need to be protected?
apparantly “Pissed off Peer” below doesn’t quite understand this idea of rights in a free and democratic country and must be a total w-banker!
Oh please, the only people this is popular with are the adviser’s that have chosen to ignore the rising intolerance from legislators, peers and the general community. If these advisers had spent the last ten years changing their practice from commission to fees instead of digging their heals in and spurting comments about the constitution then they wouldn’t have an issue today. Your time for opinion and action has passed, now it’s time for you to sit and watch in horror as your business gets flogged because of your ineptitude and laziness. I’d like to offer good luck to the AFA and any other desperadoes trying to save grandfathered commissions, it won’t help your pathetic squabble but you’re obviously going to need it.
I think you’re the one that has your “head buried in the sand”! People like you who have been in the industry for 5 minutes have been a party to decimating this industry! Good luck in the future when you’ll be crucified for not delivering on your “Fee for Service” package! You’ve simply been hoodwinked and you cant see it!
Answer 2 questions please:
1. Do you charge percentage based, flat fee or direct fees not paid from the platform or product ?
2. What is your address ?
Exactly, the Kodak camera adviser cohort.
I wont suggest, as its clear you inexperience in serving the public and those in need may not be understood by you. You should look at how centrelink work, insurance etc.
You view is that only the wealthy can afford advice doesn’t sit with me or people who care for our clients. the notion that possibly 90% of clients will be orphaned is not even a thought bubble for you it appears. I took a picture in my office waiting room last week of the people there. None of the three separate cases seated or standing would be served by financial planners in the fee for service world. yet we picked up with where other advisers left off and forgot to do their claims. i guess that’s a salaried staff issue that thy couldn’t have time for those in real need. The new world is going to cost those less fortunate much more in society. This challenges my ethics and whole being. I accept some others don’t have ethics and will not serve if there is nothing to earn. Like the solicitors who dropped the case for one other in that picture simply as there was no funds to pay. Cross subsidisation does pay. It works for social security, it works for all insurances and it works in investment. It is often cheaper than FFS also.
Well Done AFA keep pushing!!! FPA should be ashamed can you guys AFA call on the FPA in a press release calling out that they are not acting in good faith for their members and forcing them to respond so both parties can work together to get a outcome that doesn’t just shaft financial planners medium and small business.only the banks win and industry funds….
why can’t an client see a planner face to face in their town and the advisers charges per the hour and why are industry fund advisers allowed to take adviser fee’s out of the super funds but external which choice on APL’s advisers cannot.
Let it go
Go away
You will be going away with the rest of the industry unable to adapt or change, entrenched in the old ways. On your way.
No.
The RC and planners have become political footballs !
True….and everyone wants a kick !