The ending of grandfathered commissions should occur over a three-year transition with all rebated commissions going to the client rather than to product manufacturers, according to the Financial Planning Association (FPA).
The FPA used a submission to Treasury to repeat its consistent call for a three-year phase-out of grandfathering with the organisation’s chief executive, Dante De Gori stating: “The FPA supports the phasing-out of grandfathered commissions on the basis that the Government meets a range of principles, notably: that consumers are not left worse off by the change; that the Government provides for the rebating of commissions to consumers; and that the Government addresses potential unintended tax and social security consequences”.
De Gori said the FPA was concerned by the lack of detail included in the draft Bill underpinning the changed grandfathering rules, including details that would indicate the Government was going to satisfy the principles which had been laid out by his organisation.
“While we understand the Government intends to create regulations to manage the rebating of commissions, this creates added uncertainty for industry particularly given the shortened timeframe in which the Government proposes to introduce this reform,” he said.
Elsewhere in is submission the FPA restated its anti-commission stance noting that its “Financial Planner Remuneration Policy is based on some fundamental principles, including that consumers who are well informed and well educated make better decisions about their finances”.
“To this end, the FPA supports advice fees that are simple, able to be easily understood by consumers, and comparable. The FPA believes that consumers, not product providers, should pay advice fees.”
“Grandfathered commissions on investment and superannuation products are inconsistent with these principles and have led to an environment where some consumers are paying implicit advice fees via commissions and yet receiving no services,” the submission said. “With the Future of Financial Advice reforms having commenced five years ago, it is time to identify an appropriate means of transitioning from grandfathered commissions to an alternative remuneration model.”