The major bank has revealed that it has legally binding contracts for grandfathered commissions that make it difficult to enact the royal commission’s recommendation to ban them entirely.
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.
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