The Financial Planning Association has called for the ban on grandfathered commissions to be deferred and re-examined, expressing concern that the bill does not include a thorough enough plan to prevent the cost of advice rocketing.
While the body said it supports the phasing out of commissions on investment products, it noted the law introduced yesterday has no additional details or steps in place to ensure customers will benefit from the change.
The legislation has not barred commissions being charged to customers instead through investment fees, the FPA said, with the association calling for clarity on rebates of commission fees and monitoring of arrangements.
The bill has allowed 17 months for grandfathered commissions to be expelled, setting a deadline of 1 January 2021.
Dante De Gori, chief executive of the FPA, said the association has recommended the change could take up to three years if the government was to act to avoid consequences for consumers and the financial services sector.
“Removing commissions must result in a genuine reduction in product fees or the rebating of the commissions to consumers, and we haven’t seen details of how the government expects this will work,” Mr De Gori said.
“More than 50 per cent [of] FPA members have already made the transition and derive no revenue form commissions on investment and superannuation products.
“So, it’s not about whether our members are willing, they are, it’s about making sure the transition is done carefully and diligently to protect the interests of everyone, especially consumers.”
The body is also concerned retirees could lose favourable tax and pension treatments on their existing investments if they are forced to move to new products, with the bill not including any protections against the impact.
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