In a letter to customers last week, ANZ said the trustee of its Retirement Portfolio Service superannuation fund is reminding recently transferred members, with accounts that currently pay grandfathered commission, to consider their adviser payment arrangements.
They explained that this is in response to the Hayne commission’s recommendation of the removal of grandfathered commissions.
ANZ also said it is advising members how they can instruct it to cease the payment of future commission, with a customer mailing planned for 31 May 2019.
“We understand that this communication may be a concern to some advisers, however in the current environment it is important that customers understand the fees that they are paying and options available to them,” the letter continued.
“We are reminding customers with an ongoing relationship to speak to their financial adviser to discuss ongoing service arrangements.”
AIOFP executive director Peter Johnston said it will be seeking advice from its members, and its legal advisers, for the purposes of exploring the possibility of a class action against ANZ to seek damages for its proposed course of action.
Further, he said the industry body is currently in discussion with a litigation funder to explore the commencement of such proceedings.
“The AIOFP and its members are appalled by the unilateral action on the part of the ANZ Bank in allegedly seeking to encourage its customers to break their existing contracts with their financial advisers,” Mr Johnston said.
“The ANZ proposes to write to its customers advising them to write to the bank to instruct it to cease payments of commissions to advisers. The ANZ appears to base its reasons for doing so on the ‘recommendations’ of the Hayne royal commission regarding the payment of ‘grandfathered commissions’.
“These contracts were reached by agreement between the parties, and until there is legislation enacted seeking to abolish such payments, the ‘recommendations’ of the royal commission are not law.”
I thought to be an ‘independent financial adviser’, you did not receive commissions/trails etc from product providers? If that is the case, why is the AIOFP concerned with these being turned off?
If you provide an ongoing service to a client, do you not charge this as a flat fee with FDS obligations?
[quote=Adam]We had new rules set up in 2013, and every planner nodded OK these are the rules…..now they are going back and changing the 2013 rule book. That is the bit everybody should be arguing about, not how we get paid or how should we, but changing the rules retrospectively is completely unjust. I find it hard to understand some planners arguing that we should just suck it up as well, even if you don’t agree with the old commission structure. [/quote][quote=Adam]We had new rules set up in 2013, and every planner nodded OK these are the rules…..now they are going back and changing the 2013 rule book. That is the bit everybody should be arguing about, not how we get paid or how should we, but changing the rules retrospectively is completely unjust. I find it hard to understand some planners arguing that we should just suck it up as well, even if you don’t agree with the old commission structure. [/quote]
Correct Adam.
Bill Shorten was issued with specific legal advice from the Australian Government Solicitor that they must not include grandfathered commissions in the FOFA legislation as contractual rights existed allowing the adviser to continue receiving these payments.The reason: because banning the commissions on existing contracts would have been an acquisition of property forced by change of legislation and they would have been facing a Constitutional issue.
Nothing has changed. The contractual rights to receive these payments still exist now and the Constitution hasn’t changed.
I don’t have any grandfathered commissions but I cannot believe that there are not some customers who may be better off being looked after this way. I am appalled at ANZ’s decision to go behind advisers backs on something that is not even legislated yet. Legal action should absolutely be taken against ANZ.
Hang on…are you not the association of INDEPENDENT FP’s? That means you have to obey the legal definition of the word “Independent”….? (asking for a friend)
Would the trustee have taken the same course of action if ANZ still owned the advice businesses ? MMMMM ?That said, Agree it’s time for change and all advice business should be proactively working with their clients to find alternatives or cease these arrangements inside the time specified by Hayne. A more pro-active an collaborative approach could have been taken to get the same outcome.
I have less than 1% of my revenue come from grandfathered commissions. That figure is an assumption that there is 1% of revenue that I am not aware of. I don’t care to spend my time on the GC argument, either way. But I do care about product manufacturers sticking the boot into Advisers. I am 36 and could have 24 more years in this profession. I will never support ANZ or Onepath in the future. They are dead to me.
We had new rules set up in 2013, and every planner nodded OK these are the rules…..now they are going back and changing the 2013 rule book. That is the bit everybody should be arguing about, not how we get paid or how should we, but changing the rules retrospectively is completely unjust. I find it hard to understand some planners arguing that we should just suck it up as well, even if you don’t agree with the old commission structure.
So ANZ has decided to go out of business?!?
Laurie not sure you understand the idea of how grandfathered commissions work, the fee was never set nor controlled by the adviser, yes advisers have had time to turn these off, however, this is not my point, the arrangement was always set at product level, see below:
What did the grandfathered commissions pay for – if anything?
The idea behind these grandfathered commission payments was that the company paid part of their fees to an adviser
to reimburse them for help setting up the account and to intermediate between the client and the company for help in keeping the account going.
If a client had a question on the account, they could contact their “nominated adviser”, who had direct access to the account details (usually through an “adviser portal” form of internet access).
The adviser could help with information on the account and how it worked, and with changes to the account, such as address changes, ownership or beneficiary changes, premium changes and the like.
If a client contacted the company operating the account to ask for a lot of detail then they would often be redirected to the adviser noted on the account.
If there is no financial adviser, these “internal” payments would be retained by the company that issued the account. The idea was that these payments would help cover the additional cost incurred in the institution’s client service centre, as more calls would be expected than would be the case if an adviser was noted on the account.
[i]”Anonymous 42 minutes ago.
Welcome to the future. Customers pay for the service they actually get. You dont pay your accountant on ongoing payment every month to do your tax return once a year. Why planners think financial planning should be any different is beyond me. And i’ve been a planner since 2001 if you’re wondering”.[/i][i][/i]
Ah actually Mr Planner Anonymous that is one of the most stupid comments I have seen.
If you were anything of a decent planner then you would work closely with clients accountants and should know that a hell of a lot of accountants break up their client annual accounting fees to be paid monthly, exactly like advisers get paid monthly from their annual fees.
Agreed clients should get service and get what they pay for but you really have zero idea.
If these advises are truly independent as defined by the Corps Act, they can’t take commissions so why are they pushing back so hard on it? Seriously?
This has little to do with “yet passed” legislation. It has everything to do with existing super trustee duties that have been around for a very long time but potentially ignored until now. They got called out called out for not having sufficient oversight when paying trail commission from their super product for member personal advice provided on that super fund and meeting the sole purpose test on an annual basis. This is not the ANZ trustees choosing this path, it is the regulator saying “do nothing and we may test whether you are meeting your duties in court”
Welcome to the future. Customers pay for the service they actually get. You dont pay your accountant on ongoing payment every month to do your tax return once a year. Why planners think financial planning should be any different is beyond me. And i’ve been a planner since 2001 if you’re wondering.
BT Retail went a step further. Closed down the commissioned product and moved members to a non-commissioned product.
So mortgage brokers banded together to ensure they kept their businesses going by stopping the ban on trailing commissions whereas financial planners are fighting with eachother ? This is pure madness. If you don’t like trailing commissions then change your fee model but for goodness sake why attack your colleague’s right to retain their entitlements to trailing commissions ?
Laurie
Good on ya mate, you are just as Anon. I could call myself Nic Naitanui here if I wanted too!
Yes, I am an adviser, yes I know the legal agreements. Yes I have my own business. And you know what I practice what I preach. You have had 5 years to sort this out knowing full well it is unpalatable to clients and the regulator, 5 years to convert those clients to fee paying clients, 5 years to show your value .
If YOU have not done this then only YOU are to blame
Our business moved clients out of old commission based products to non-commission paying products and a fee for service model like 8-10 years ago.
I cannot believe that there are advisers/businesses out there still arguing that they should be able to receive commissions without providing any meaningful or personal service.
I hope those arguing are those who will not complete education requirements and farewell this industry so it can become a true profession.
The rort that is fee for service is being called out.
No service, no value? Well no fee payable. Simple.
The gravy train joy ride is over.
Fee for service is just commission by another name, in most cases it is WORSE than Up front commission. You all know this but choose to ignore it. A tiny percentage of you data base needs the service and you know that too.
The free lunch is finished – provide a service or no fees
[quote=Alan]How is this a problem? Why shouldn’t clients be informed of their rights? PS I have been an adviser for 19 years. [/quote][quote=Alan]How is this a problem? Why shouldn’t clients be informed of their rights? PS I have been an adviser for 19 years. [/quote]
Have you seen the letter Alan ?
Do you know the background of how this specific letter has come about ?
Do you know the response from clients in regard to previous correspondence sent and why this particular letter was
enforced to be re-sent ?
AIOFP are completely out of touch with reality. Hayne fairly and squarely put the trustees of super funds on notice that they have a fiduciary responsibility to members. This is simple example of what’s to come. Those who deliver a genuine service as per the whole concept behind “servicing commissions” rather than a phone number to call, will have no difficulties.
Anon. You obviously have no idea of the legal situation in regard to the grandfathered trail commissions and how these remunerate advisers to provide ongoing service and advice to clients.
I assume from your comment that you are not an adviser. Therefore if you don’t have the knowledge don’t comment.
Also if you can only comment under “Anon” your comments carry no weight. Don’t you have a real name.
Also to make this comment against all Financial Adviser could be considered libel. Any wonder you don’t have the guts to use your own name so that no action can be taken against you.
How is this encouraging its customers to break their existing contracts with their financial advisers?
Hi, you’re paying a commission, speak with your adviser about this and other payment arrangements that are available to you.
Never stand between a financial institution and a quick buck. Does this alter the IOOF purchase price?
How is this a problem? Why shouldn’t clients be informed of their rights? PS I have been an adviser for 19 years.
so once the adviser is no longer being remunerated to provide a service, the responsibility is between ANZ and the client as the arrangement has been made at that level to provide on going advice, so what arrangements does ANZ have in place to meet that responsibility? Will they now be in breach of contract? Is a letter outlining this also been sent to the client?
If you are servicing your clients, you should have nothing to worry about. If, however, you are receiving a revenue stream for a service thats not being provided, end consumers shouldn’t pay for it. Simple. Lets move more towards being professionals like we promise our clients…
Perhaps the AIOFP should be spending their time and energy on helping their members transition to more sustainable fee models instead of fighting to maintain the status quo.
Wake up and smell the roses AIOFP, your members have had many years to ween themselves off these payments.
Did ANZ also say that they would rebate this amount to the clients or keep it?
So the biggest crooks in the land are unhappy that one of there stolen revenue sources are shut off ?