The Association of Financial Advisers has hit out at the government following parliamentary approval of its ban of grandfathered conflicted remuneration, calling the outcome “devastating” for affected advisers.
Under the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019, grandfathered commissions will be banned from 1 January 2021 and product issuers will be required to rebate the amounts to consumers
In an update to members, AFA chief executive Philip Kewin expressed his dissatisfaction with the government’s “lack of due process” on the issue.
“We recognise grandfathering does not impact all advisers and indeed many see it as a blight on our industry that needs to be removed. We also recognise that banning grandfathered conflicted remuneration will remove another of the layers of opaqueness that fuels negative perceptions of financial advice,” Mr Kewin said.
“However, the outcome will be devastating for some advisers, particularly those, who in good faith borrowed money to kick start or grow their client base, and now will not have time to review their clients whilst trying to maintain an income to repay a loan on an asset that now has no value.”
Mr Kewin continued by saying that, regardless of your personal stance on grandfathering, the result in the short term will be devastating for some advisers and their businesses, and called on members to “spare a thought for those colleagues”.
“They have acted in good faith and within the law and while many will adapt and survive, for others it will turn their lives upside down, if it hasn’t already done so,” he said.
Further, Mr Kewin said the bigger consequence will be “the hundreds and thousands of clients who will now be unable to access affordable financial advice”.
“In many cases it will just not be viable for the adviser to undertake a review and convert a client to a fee-for-service arrangement,” he said.
“Many thousands of clients will now be left without an adviser, so the next phone call when they receive a letter from Centrelink, or want simple information, will have to go to the institution that is providing the product.
“And the answer in most cases will be we don’t deal in that information, or ‘sorry, we can’t give advice’.”
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