The ruling follows from a recommendation of the Hayne royal commission to end the payment of grandfathered commissions.
The Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 will mandate grandfathered commissions are expelled by 1 January 2021.
The bill will also include the founding of a scheme that will make businesses still paying conflicted remuneration after after 1 January 2021 rebate clients for any remuneration paid.
The Treasury said the government has commissioned ASIC to monitor and report on the extent to which product issuers are acting to end the grandfathering of conflicted remuneration.
A statement from Treasurer Josh Frydenberg said the reform will benefit consumers, as “they will receive higher quality advice and stop paying higher fees to fund grandfathered conflicted remuneration”.
I fail to see how the Government is acquiring anything from anyone? They’re stopping a charging model. They aren’t collecting your gravy and keeping it. Grandfathered commission isn’t a god-given right, you should never have had it in the first place. If you’re left without a chair when the music stops, perhaps look at your advisers when you purchased your book of grandfathered clients and question the agreement you signed which didn’t factor in regulatory change.
The number of Firms moving from providing retail advice to wholesale only is increasing in big numbers already since the Royal Commission. We are looking more closely at this space also. But then again, this means less benefit and professional advice to those who need it the most – the Retail mums and dads. Great work from the Media in pushing their hype and agenda onto a government who (on both sides of the house) didn’t have the balls to put their foot down and say no and call bollocks on the constant media stories. I notice the enormous number of complaints and lawsuits over Accountants doing the wrong thing never resulted in a Royal Commission for them, but that’s probably because it’s not as exciting press for the media to report on is it.
needs to go along with broker trailing commission
OMG, they are gonna butcher us.
Charge a fee of $360 and turn off the commission, common sense [quote=Anonymous]My 80 year old client has $60,000 in a pension fund who I see every year with both Centrelink , future inheritance etc . She has a grandfathered commission of 0.6% ie $360 p.a that will be stopped. I will then stop seeing her . Outcome , bad for client , bad for industry . Seriously , can anyone tell me this is good ? PS please moderater outlaw swearing !!! [/quote][quote=Anonymous]My 80 year old client has $60,000 in a pension fund who I see every year with both Centrelink , future inheritance etc . She has a grandfathered commission of 0.6% ie $360 p.a that will be stopped. I will then stop seeing her . Outcome , bad for client , bad for industry . Seriously , can anyone tell me this is good ? PS please moderater outlaw swearing !!! [/quote]
How can you afford to deliver compliant advice Eg ROA/SOA each year to client for $360?
You moderators are clowns, and this website is dirt. Block comments that are not offensive, allow obscene language, rubbish articles, netwealth ads dressed up us news, the list goes on. Amatuers
IN our business, for about the past 7 years, whenever we meet with a client in a grandfathered comms product, we roll them into a newer retail product and implement an ongoing service fee. Those old products are generally overpriced and often perform poorly.
Of course there are exceptions, but I don’t buy the fact there are a huge number of clients in grandfathered comms products receiving genuine ongoing advice/service.
[quote=Anonymous]My 80 year old client has $60,000 in a pension fund who I see every year with both Centrelink , future inheritance etc . She has a grandfathered commission of 0.6% ie $360 p.a that will be stopped. I will then stop seeing her . Outcome , bad for client , bad for industry . Seriously , can anyone tell me this is good ? PS please moderater outlaw swearing !!! [/quote][quote=Anonymous]My 80 year old client has $60,000 in a pension fund who I see every year with both Centrelink , future inheritance etc . She has a grandfathered commission of 0.6% ie $360 p.a that will be stopped. I will then stop seeing her . Outcome , bad for client , bad for industry . Seriously , can anyone tell me this is good ? PS please moderater outlaw swearing !!! [/quote]
There is literally NOTHING stopping you from charging that client that exact same fee ongoing and rolling them to a much lower cost product and save them even MORE money… This comment is only proving the point.
Massive mistake resulting in consumers paying significantly more and politically manipulated legislation which is very likely to be unconstitutional and may result in massive compensation costs being paid to advisers due to the forced acquisition of property.
Advisers have existing contractual rights to the receipt of that property which were quarantined from the FOFA legislation based on specific legal advice provided by the Australian Government Solicitor to Bill Shorten in August 2011.
It is highly likely the advice received by Shorten specifically indicated a massive liability and compensation issue would arise if he banned existing and grandfathered commissions.
Josh Frydenburg needs to provide this advice to all parties.
All requests and appeals for the release of this advice through FOI have been rejected.
If there is nothing to be concerned about, then it would be released.
The Govt is purposefully restricting access to this advice as the release of it may then set a precedent they do not wish to defend.
This is manipulation based on a web of deception.
What about Section 51(xxxi) of the Constitution? How does this not apply??? Even Bill Shorten conceded this was an issue back in 2011 when Treasury received advice that they couldn’t ban GF without contravening Section 51(xxxi). Businesses, families and lives will be decimated overnight with this. I thought the Coalition would at least consider the impact on advice businesses through consultation with industry bodies. Dealer groups and product providers were happy with these arrangements for a long time. It’s interesting to see how even they are turning on their own Advisers in an effort to look like the good guys. I’m at a loss. This is so sad and depressing.
My 80 year old client has $60,000 in a pension fund who I see every year with both Centrelink , future inheritance etc . She has a grandfathered commission of 0.6% ie $360 p.a that will be stopped. I will then stop seeing her . Outcome , bad for client , bad for industry . Seriously , can anyone tell me this is good ? PS please moderater outlaw swearing !!!
Time to load up on all his social media till he blocks me
A lot of people complaining this move will leave clients unadvised. Lets be honest, most clients on a grandfathered commission structure were unadvised anyways (while paying for it).
Just charge the clients a fee instead. If you would need to charge a higher fee, those people shouldn’t have been clients in the first place. Know your value and price accordingly.
Can the Liberal Government please outlaw the commission I pay the Australian Taxation Office each year? For years I have been left in an inferior and expensive tax system whereby the people supposed to be looking after me have lined their own pockets and delivered very little value to me. Further I find it unfair that the more I earn, the more I should pay them in a commission as the advice, service and benefits offered to me by the Australian Taxation Office dont appear to differ between my situation and that of a low income earner!
Advice fees will rise, and already are. Insurance premiums won’t reduce at all (insurers have already stated this for a fact). Product fees will reduce by perhaps 0.25-0.5% at most for funds/platforms. To make up for the lower risk comms and no trails though, Advisers will say no to more clients and more clients will end up unadvised or under-advised, under-insured, less wealthy and there will be more reliance on the under-funded, over-crowded government allowance sector (Centrelink). Great work guys.
We will officially be removing ongoing service to the people who can least afford it. We weren’t obligated to provide it previously but felt duty bound to do so – even when it cost us. We saw that service as part of our social contract to the community. However with compliance costs, licensing and PI skyrocketing and now a revenue source being removed – something has to give. That something is our former social contract / goodwill gesture. Now we will only be serving those who have the means to pay upfront.
Hayne, The FPA, Labor, the Unions and now the coalition have misunderstood this. They are not there for the people who need advice. Their influence has cost those they purport to serve – the battlers.
Hang your head in shame
I wonder where these dickhead public servants (this includes politicians) will move on to next. There must be another industry out there waiting to be butt fucked
I understand the argument about product fees potentially dropping if comms stop (assuming fund manager or super fund passes it on in full, unlike OnePath!), but in reality clients are paying far more in fee for service than they did under the commission structure. From our perspective we earn a lot more from clients under fee for service, but the saving at fund level is generally negated by the fees for advice/service we need to charge. Maybe Mr Frydenturd can explain how lifetime annuity providers plan to rebate commissions and how the generally client of limited financial means that still consults you for Centrelink assistance each year can afford to pay for your time from their bank account when they have limited financial means! Its good old Government Ideology again at its best!
some academic, peer reviewed research wouldn’t go astray here… oh but what’s the point… for those interested have a look at this – [url=http://[i]Šindelář, J & Budinský, P, 2017. Evaluating the relationship between IFA remuneration and advice quality: An empirical study. Financial Services Review, pp. 367-386.[/i][i][/i]][/url][url=https://is.vsfs.cz/repo/6853/FSR_2017-4_Sindelar_Budinsky.pdf][/url] – empirical evidence from the Czech republic, no doubt different from our market but it does prove research can be completed and the impact of conflicts measured, the government is just too lazy. Dumb policy from an ignorant government pushed around by an ideological retired Judge.
“the reforms will benefit consumers because it will enable a higher quality of advice.” I guess that’s the Government coming out and saying your advice has been of low standard. So any planner who worked from 1980 till 2013 you’re advice has been poor. Your life’s work has been of low standard. Pretty offensive. I think so. Over to the FPA for comment?
Come January 2021 Will the FPA now solely get membership money from Advisers, (just like there members get money solely from their clients) or will they continue to get “commissions” from other sources and remain conflicted?
Fee for service is not always in the client’s best interest…might as well get investment advice from my dentist, it’ll be cheaper even with 25% rebate from private health cover that I’ve held for 15 years and not claimed on. Capitalism is as capitalusm does.
Of course this extends to mortgage brokers too right….
dont worry Adrian Raftery and AIOFP are working on a lawsuit.
How many votes will they lose because of this?
There’s no hard evidence that backs up anything that Josh is claiming, it’s all preaching and no research.
Countries where commissions were banned, it resulted in much fewer people seeking advice as they’re less willing to pay higher “transparent” remuneration, and advisers going out of business or struggling to survive in an uneconomical regulatory environment.
Australia generally dodged a bullet on May 18 but the Financial Services industry certainly hasn’t – I thought we could rely on a Coalition Government to act in a fair & reasonable manner but apparently not – consumers won’t benefit at all; instead of getting better advice they won’t get advise at all the the rate of no or under insurance in Australia will only increase. In addition there is a legal issue to this; commission was included & disclosed when the contract was entered into – to ban it now is retrospective & just plain WRONG, As an older Adviser I’ll be getting out soon but heaven help young Advisers coming into the industry now
Great.. at least I can put myself out of my misery.. asta la vista baby (time to say goodbye to all of the regulatory crap, FASEA, ASIC.. the list goes on and on). Perhaps the industry should highlight the [b]MASSIVE JOB LOSSES[/b][b][/b] as a result of this pathetic legislation but I think our beloved Politicians are too stupid or have collected too many donations from the big boys to bother them. I hope that they are happy with themselves when planners go broke and lose their homes.. just make me angry how we have been thrown under the bus.
Josh is kidding himself if he thinks this will improve the lot of clients or advisers and will simply continue to line the pockets of Institutions. What has the 40 – 50% reduction in Life Commissions achieved for clients??? nothing – advisers are paid less Life Insurers have kept the balance and advisers no longer work with those who need it because they cant afford to do the work. Who will now service the smaller clients who cant afford to pay an on-going service fee that currently were able to deal with the adviser in receipt of Grandfathered Commissions? They will be funneled to Industry Funds offering no advice (or service) and contributing to making the funds unworkable through sheer size.
No Mr Frydenberg this reform will not reduce the fees being paid by consumers nor will it have any impact on the quality on the quality of advice given, good or bad.
Just BS.. ball wrecking but they know best
So the Government is acquiring my property???? Where’s Charles Tingwell when you need him?
What a clown you’ve become Josh in your pursuit to become the next Victorian PM.
You lied to your own (highly respected) adviser about the FASEA education reform impacts on the industry and now you roll this rubbish out that ‘the reform will benefit consumers, as “they will receive higher quality advice and stop paying higher fees to fund grandfathered conflicted remuneration.”
Again, what the regulators and Government set out to ‘apparently’ achieve will be the exact opposite of what will actually happen to consumers. May I suggest that you don’t let the ‘financial services’ industry door hit you in the arse on the way out as I suspect this announcement probably just inserted numerous final nails into the coffin of many good adviser businesses and this industry.
I think the last sentence was meant to read… “they will receive the same high quality advice and continue paying high product fees (unless they are rebated by the provider), to fund advice and service, they will need to pay high fees on top of product fees.
Additionally, there will be no compensation or consideration of advisers that purchased businesses in good faith with commissions as part of the revenue stream. It is expected that these outlaws will either leave the industry broken and broke or remain in the industry to pay off a business that isn’t worth anything any more.
In other news, all elected representatives will be required to complete ethics training and pass an ethics exam. This will clearly solve the problems of self interest, partisan politics and breach of ministerial codes of conduct.
Wow let’s just let the crown casino to do all the rorting and do nothing what a fucked government
I was of the understanding a court case was imminent in relation to grandfathered commission. Josh has jumped the gun on this one.
and if we had a Royal Commission into cage laid eggs, they’d come out with legislation to ban cows!
what bol****s! “will receive higher quality advice..” owing to commissions stopping? how does that work? Clients will pay more for advice. insurance premiums should drop, lets see what actually happens. Advice costs are rising and with fewer advisers left to do the work, will rise further again and rightly so. We take huge risk and the reward needs to reflect that risk. The powers-that-be have no idea of how our industry works. Frydenberg, such a lightweight.
So where does the contractual agreement between the client and the fund manager / life office,and the life office / fund manager and the adviser sit now? it will be interesting to see how the AOIFP class action fares