The Coalition ends grandfathering today

Alex Burke,  Senior Writer,  No More Practice Education

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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Byron Littlewood

01/08/19

So now, assuming the legislation is passed, I have to go through my older client superannuation and allocated pension funds paying me a mere 0.00% to 0.44% of the balances and increase their fees to at least 0.77% or higher to help offset the costs and requirements of the FDS and Opt-In and move from managed funds who reap the big rewards to direct shares and property. OK I have a work for the next few years to do that and double my remuneration. Thanks Hayne for the extra work.

rosella mamone

01/08/19

I disagree that 'grandfathered commissions' are conflicted remuneration. Firstly the investment and superannuation / pension products were written 20-30 yrs ago and as such typically have not been reviewed since it was then a set an forget strategy. it is not as though the adviser would be receiving both an ASF and commission from the written product! second of all planners whether they wrote the business or purchased a book of clients - such as myself - for the purpose of having some cashflow to pay for 'fees'!!! as they are so hefty have now been 'ripped off' of what is income! I find this most unfair and unjust and should be downright illegal!!

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