The Financial Planning Association (FPA) has called on the Government to specifically detail what will happen to grandfathered commissions, if they are not to go to financial advisers.
The Government introduced the legislation banning grandfathered commissions today, with the FPA complaining that it was light on detail and that consumers could be the ones to miss out with the Government rushing its bill to end the grandfathering of commissions on investment products.
The FPA said that while it supported the phasing-out of commissions on investment products as recommended by the Financial Services Royal Commission, the bill introduced by the Government today had no additional details on how this would be done to ensure consumers benefit from the change.
FPA chief executive, Dante De Gori said removing commissions had to result in a genuine reduction in product fees or the rebating of the commissions to consumers but this had not been detailed by the Government.
He said just because a financial planner stopped receiving commissions, didn’t actually mean the consumer stopped paying them through their investment fees because the cost of the commission was embedded in the fees, which was why the rebating and monitoring arrangements were so important.
“Retirees could lose even more by giving up favourable tax and pension treatments on their existing investments if they are forced to move to new investment products, with the bill making no provision to prevent this impact.”
“We are disappointed the bill allows only 17 months to complete a change that the FPA has recommended could take up to three years if the Government is to avoid unintended consequences for consumers, and the financial services ecosystem,” De Gori said.
“More than fifty percent of FPA members have already made the transition and derive no revenue from commissions on investment and superannuation products. So it’s not about whether our members are willing, they are, it’s about making sure the transition is done carefully and diligently to protect the interests of everyone, especially consumers,” he said
The FPA urges the Government to provide a full three-year transition period and release further details of the proposed rebating and monitoring scheme so they can be examined by the industry.