The Coalition is opting to extend the Royal Commission

Alex Burke,  Senior Writer,  No More Practice Education

Treasurer Josh Frydenberg announced that the Morrison Government has asked the House of Representatives Standing Committee on Economics to investigate the progress made by "relevant financial institutions" in implementing the recommendations made in the final Royal Commission report.

Importantly, Frydenberg noted that the Committee will now be investigating "other major relevant financial institutions and leading financial services associations," and that as per Hayne's report, "primary responsibility for misconduct in the financial sector lies with the institutions concerned and their boards and senior management."

"This inquiry will help provide further transparency to the public on the work financial institutions are undertaking to implement recommendations from the Royal Commission," Frydenberg continued, "and in doing so will contribute to restoring the community’s trust in the sector."

"The Government has asked the inquiry to commence as soon as possible," he said.

Frydenberg's announcement follows the introduction of 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, Frydenberg 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.


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Neil Armistead

08/08/19

Maybe, just maybe, Mr Frydenberg should also look at a lot of the Government enforced previous bits of legislation that basically "force" an adviser to leave a client in a "maybe" less suitable product. A case in point being the Centrelink grandfathering legislation in relation to deeming that can leave a client in an old product because of the poorly thought out Government legislation that as usual attracts unintended consequences. How about our leaders look at the whole picture, not what is topically news at any point in time.

08/08/19

Josh Frydenberg's comments are unfounded. To state consumers and clients will receive higher quality advice simply as a result of paying for that advice differently is unproven and most likely will never be substantiated correctly. For Frydenberg to also infer that clients within an older product are disadvantaged and paying more to the adviser when compared to " newer, better and more affordable products" is empty rhetoric and politically convenient. It is no different to Kelly O'Dwyer continually claiming that " enhanced consumer outcomes" would be the direct result of a reduction in the level of commissions paid for Risk Insurance advice. It is simply not true. It is entirely convenient for these statements to be made because they reinforce an agenda, but they are without foundation. The fact is that there are many reasons why a client may be disadvantaged by transitioning away from an older or existing financial product. Take for example a Lifetime Annuity product (Asset Test Exempt), which commenced some time ago and the adviser remuneration has been actuarially calculated into the product for the life of the annuity and the resulting income payment. It may be entirely impossible to strip the commission payment from this type of product meaning that if the adviser no longer receives the payment for their service. the client will not actually receive an increase in the annuity income payment and therefore not be any better off financially. Secondly, this type of product may well not have the option of structuring an adviser service fee arrangement that can be paid from the product based on the long term structure of the product from inception. Thirdly, moving a client from an asset test exempt annuity to an assessed product would prove to be a distinct financial disadvantage and against the client's best interest. It is quite often in the client's best interest to maintain their current strategy and not transition to a new strategy or product. So, if the commission payment is built in to the long term product calculation and cannot be removed and hence no lift in income payment to the client, the client would then have to pay for the advice provided with alternative monies but not from within the product itself, thereby costing the client more and resulting in a financial disadvantage. It is the empty, vacuous statements from politicians who do not understand the technical basis of the advice provided or the technical structure of financial product that renders their comments ill informed and dangerous. The "unintended" consequences of politically expedient legislation is negligent. The cynical would think that perhaps the consequences are " intended" rather than being an oversight. Grandfathered commission remuneration could easily be subjected to the current FDS and Opt In regime and the consumer and client would be fully informed of remuneration cost and hence make a value judgment. The adviser is obligated under the Best Interest Duty to either recommend an alternative strategy or to hold a current strategy if it is of advantage to the client. Rather than place the client in a position of potentially losing a current advantage or paying more for the advice process, it makes entire sense to allow the consumer to make an informed and clear decision rather than enforcing a change that may be detrimental. Take the recent Protecting Your Super debacle, where tens of thousands of clients have inadvertently lost their insurance cover and now want it reinstated. If the Govt had thought through this correctly, they would have implemented an Opt-Out basis and not an Opt-In basis. This has proven to be an absolute mess and placed massive administrative costs upon superannuation funds. The Govt needs to listen and to cease treating the financial advice industry with such disdain and disrespect.

Jody H

08/08/19

Who watches the fox when the fox is in the hen house. When is there going to a royal commission to government payments, ranging from salary, salary increases, retirement packages prior to retirement age and jobs after politics from companies who have political interests. These perks that ordinary Australians aren't accessible too. If advises have a 2 year responsibility period so should the government ministers at all levels of parliament, when policy are not implemented. MP should have there salary returned to the budget. But who will call a Royal commission on parliament salaries, This is the industry which needs more transparency on results. Which industry can give themselves a pay rise and when the company is in debt, the company would be called into government inquire, So why should politicians have a salary increase when the budget is in debt.

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