In a joint statement, Treasurer Josh Frydenberg and Assistant Minister for Superannuation, Financial Services and Financial Technology Jane Hume said they have introduced legislation to "ban the grandfathering of conflicted remuneration paid to financial advisers."
Arguing that grandfathered conflicted remuneration can incentivise advisers to recommend clients financial products that aren't in their best interests, the statement said it "can entrench clients in older products even when newer, better and more affordable products are available on the market."
"The Government's reform will benefit retail clients," the statement continued, "as they will receive higher quality advice and stop paying higher fees to fund grandfathered conflicted remuneration. Commissioner Hayne made it very clear in the Royal Commission Final Report that this grandfathering shouldn't continue."
The Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 will ban said remuneration by 1 January 2021.
"We are also going further," the statement added, "by including in the Bill a power to make regulations to establish a scheme that will provide that those people paying conflicted remuneration rebate clients for any remuneration that would be paid after 1 January 2021."
ASIC will also be commissioned to monitor and report the processes product issuers are implementing to end grandfathering of conflicted remuneration.
You'll recall that earlier this year, Assistant Treasurer Stuart Robert said that while advice "has been an important part of the wider Australian economy, generating billions in revenue and employing tens of thousands of people," the landscape is "evolving and we need to adapt."
Robert referenced the fact that most major banks are selling their wealth arms, and that the same time "financial advisers have been exiting institutionally affiliated and owned businesses to work for privately owned firms."
Alongside these trends, Robert said "the remuneration models for many in the industry are also changing." Pointing to the Royal Commission, which recommended ending grandfathering of conflicted remuneration, he said "grandfathering has now been in place for over five years, providing industry with sufficient time to transition to the new arrangements."
Robert argued that given this, it was, ultimately, "now appropriate for grandfathering to end."
We'll keep you posted as to any responses this legislation receives.
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