Last week we discussed how Assistant Treasurer Stuart Robert told the Financial Advisers Association conference that it was “now appropriate for grandfathering to end.”
Specifically, the recently re-elected Coalition government now expects all grandfathered remuneration to cease in period between 1 July 2019 and 1 January 2021. That means all advice businesses, regardless of their size or structure, will need to remove any grandfathered commissions within less than two years.
At the time, Robert added that the Government is “in the process of implementing the Hayne recommendation,” adding that “many banks and other financial institutions, in response to Hayne, have already off their own bat banned grandfathered conflicted remuneration – to the extent that they can.”
As a result of this, we now know ASIC has been sending letters out to licensees with a view to ascertaining the extent to which their revenue can be considered conflicted.
This will likely be a wake-up call for many licensees, as they will need to identify all products on which grandfathered remuneration has been received.
The news that ASIC is now investigating licensees to determine how much of this is on the books represents the first tangible regulatory step towards winding up grandfathering following re-election of the Morrison Government.
Wiping out grandfathered remuneration completely has been a controversial issue. Our contributor – and Connect Financial Service Brokers CEO – Paul Tynan said that it’s folly to “blame advisers for trail commissions when they were a part of the product design and the only product available to satisfy client needs.”
“Trail brokerage in these products did not constitute an ongoing service arrangement,” he added.
Has your licensee heard from ASIC? How is it transitioning in light of the deadline?
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