ANZ deputy CEO Alexis George appeared before a parliamentary inquiry on Wednesday, where she was questioned by a number of MP’s about the bank’s implementation of the royal commission recommendations.
“In relation to our salaried planners, we will abolish grandfathered commissions from next week, effective 1 April,” Ms George said.
“We committed to that earlier in the year. In relation to the broader book, I think it is important that legislation be enacted because there are legal contracts out there in relation to that. I still would encourage that to occur, because I think there is a point where grandfathered commissions don’t serve their purpose,” she said.
Ms George confirmed that she encourages parliament to legislate the recommendation to ban grandfathered commissions.
However, Labor MP Matt Thistlethwaite pressed the ANZ executive over the “contracts” she mentioned.
Ms George said these relate to “the obligations ANZ has with the advisers of those customers to pay those grandfathered commissions, which is a separate agreement between that customer and that adviser. I’m talking there as a provider of the service.”
When FOFA was first introduced, a parliamentary committee agreed to provide a carve out for grandfathered commissions. Mr Thistlethwiate said that despite this, the advice industry was put “on notice” and understood that grandfathered commissions wouldn’t last forever.
The MP asked Ms George why grandfathered commissions have not been phased out sooner.
“I can’t answer that question. We are at a point where we are five years on from FOFA. We are probably at a time where we can review it and remove grandfathered commissions now. I would encourage the legislation to be enacted,” she said.
Mr Thistlesthwaite suggested that some financial planners had borrowed money against their business or acquired an advice practice “with their eyes closed’ under the assumption that grandfathered commissions would remain in place.
1) Shouldn’t the banks be forced to pay say 3 x commission income to Planners as compensation?
2) This is too complex for Me Mr Minister but um ah Perhaps maybe a “service” / “advice”/ “relationship” was being provided. Is this ANZ person a Financial Planner? Maybe they should have asked the Janitor as well as to what he thinks. Let’s ask an organization that dosen’t give a rats about Consumers and Corporations law as shown by the Royal Commission what their thoughts are.. Yes they will be reliable and trusted source won’t they.
AFA or FPA need to start campaigning. We advisers are good at looking after our clients. We are bad at politics and propaganda. Clients value our advice and have no issues with our FDS and signing opt-ins.
We are the natural competition of product providers and legislators. Think about it. We cost them money for the benefit of our clients.
We all place our clients into better performing and lower cost products. This costs product providers money and they need to increase their spend to improve value for our clients. Or we move them. That is not what they want. They want no advisers so that they can retain clients in outdated overpriced products and lower their spend so they can increase their profit.
We all recommend strategies to clients to reduce their tax and increase clients age pension entitlements. This cost the government money in reduced tax revenue and increase social security spend.
It also makes them look foolish when they change a super law, and we as advisers work a new way to benefit our clients under the new law. Then they need to amend it because we identified the opportunities to improve our clients position and recommend it to our clients.
They both want us gone because we improve our clients situations at their expense. And they don’t like it. So they try and limit our reach by making us out to be the bad guy and increasing the adviser delivery burden. Well, that’s what i’d do to a competitor anyway. Master politics.
Congratulations to us for doing so well for our clients that the rules keep being changed because we have done our jobs and applied the existing rules to our clients and the legislators can’t afford our clients to benefit.
Imagine if we could give advice simply to more people. Is that why mums and dads are being legislated out of the advice market because we actually do add value to them at the expense of someone else’s revenue? (governments, banks and industry funds. Are they ‘all in this together’?)
Why would anyone run a business in Australia, when despite the investment a person makes to buy or create a business, despite contracts in place, a government can merely “legsilate” to destoy a business it does not like not for practicle reasons, rather for ideology politically or an agenda to achieve for their puppet masters in either insto world or inductry funds. Why would anyone invest in Australia ?
The ABSOLUTELY STUPID THING IS THIS….Grandfathered commissions would have died off anyway…
Clients move planner because they see no value in paying the commissions.
Clients get changed (where appropriate) by the planner into a beneficial product – because of best interest duty.
Clients move from accumulation to pension phase.
Clients die. Product is cashed in.
Each year the percentage of grandfathered comms gets smaller and smaller…are “they” trying to get in before the natural death of Grandfathered comms so “they” can claim political points?
…while destroying businesses and effectively “breaching” agreements in place.
[quote=GPH]Those Financial planners who “apparently” had their eyes closed, borrowed money (for these acquisitions) from banks who must also have had their eyes closed, is there some culpability on behalf of the Banks in lending on an asset / income stream they (now) clearly state was not going to last? will they forgive the debt now that they are switching off the income? I suspect not. once again it is Banks win, advisers lose. what will happen to those switched off trails? there have been a number of comments on how they are very difficult to track and monitor for refunds / rebates to individual clients.
[/quote]
The bank can buy them from me at 3 times today and can then turn off the commission tomorrow. That fixes it. Bank pays me, i pay my loan, client reduces fees.
The bank will recover the costs over time as the client will have not adviser to recommend a lower cost product and will stay stuck in the high cost bank fund. The bank could do a successor fund transfer to get those clients into lower cost funds but as shown in the RC, they aren’t the good guys they claim to be and haven’t done that. It would cost them revenue.
I think simple.
Insto buys them back at 2.5 to 3 times. Insto turns them off in 2.5 to 3 years or 100% rebates to client. Win – win for everyone and all grandfathered comm’s gone in 2.5 to 3 years. Fair result across the board and in a pretty timely and managed way.
Matt Thistlethwaite….you have been a Union employee, an employed Solicitor for a year and a career politician.
May I ask what you would know about running a business ?
just tell the stupid politicians that they have made the industry so complicated that it takes 25 hours of work to provide advice and transition over to new arrangements.. and by the way, remind them of insurance limitations (u/w), centrelink/deeming, CGT and any other roadblock that I have missed. Talking about a bunch of nitwits chest pumping trying to appeal to every left wing activist!! And yes.. of course.. why don’t you legislate on stupid Australians to actually read their annual statements and to do something about it.. grand fathering is easily solved if they switch products themselves.. but we live in a country where no-one wants to take responsibility!!!
Can someone direct me to direction provided at the time of the FOFA implementation to support Mr Thistlethwaite’s claims that “the advice industry was put “on notice” and understood that grandfathered commissions wouldn’t last forever.” My recollection was that grandfathered meant grandfathered, not grandfathered for a few years.
ANZ can pay the adviser three times trail, which is about what they paid for the book. When the adviser gets the money he or she can repay the bank loan. None of this is difficult!!
Can anyone explain why the argument that mortgage brokers need to receive trailing commissions to ensure the viability of their small business does not apply to financial planning small businesses ? And on what basis has the FOFA carve out for grandfathered commissions been overruled by the Royal Commission ? The legalities should be tested at court and fund managers should consider the long term consequence of disengaging advisers from servicing customers and providing distribution to them. If they have no one to service their customers and no one to distribute their product how will they remain a viable going concern ? Advisers will switch their customers into wrap structures. RIP retail managed funds. They are digging your own grave.
Those Financial planners who “apparently” had their eyes closed, borrowed money (for these acquisitions) from banks who must also have had their eyes closed, is there some culpability on behalf of the Banks in lending on an asset / income stream they (now) clearly state was not going to last? will they forgive the debt now that they are switching off the income? I suspect not. once again it is Banks win, advisers lose. what will happen to those switched off trails? there have been a number of comments on how they are very difficult to track and monitor for refunds / rebates to individual clients.