Grandfathering end hurts advisers not product providers

11 September 2019

Just days before the Government moved to pass the Ending Grandfathered Conflicted Remuneration Bill through the Parliament, the Association of Financial Advisers (AFA) has lamented the manner in which advisers had been inadequately consulted and stood to be disproportionately disadvantaged.

The AFA has also complained that product providers have been placed at an advantage to advisers amid an “underlying assumption that financial advisers can either convert clients within their existing products to Adviser Service Fee arrangements, or can move them to alternative products”.

It said the Bill provided no flexibility for financial advisers, “however it is apparent that there have been some material changes that have been made since the draft, which will presumably serve to benefit product providers”.

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“We are very concerned about the lack of explanation of these changes,” it said.

In a letter to members, AFA general manager, policy and professionalism, Phil Anderson expressed concern that the Government had moved ahead with the legislation without listening to the arguments of planners and without taking account of likely significant client disruption and detriment.

Further, the letter makes the point that the legislation has sought to remove key adviser protections contained in Section 1350 of the Corporations Act which provides for compensation to be paid to small business financial advisers where product providers unilaterally vary the terms of existing agreements in a manner that is in breach of contract.

“The fact that the Government is choosing to remove the applicability of this section, is in our view, an acknowledgement that there is the potential for constitutional issues with respect to the acquisition of property on other than just terms,” it said.

“For us, the biggest issue with respect to the removal of the applicability of Section 1350, is that the Government is removing the rights of small business financial advice firms in order to protect the interests of predominantly large business financial product providers.”

The AFA accepts that all sides of politics are determined to see an end to grandfathered commissions, however it is important that this process is pursued on the basis of detailed consideration of the evidence and the consequences for clients and the financial advice sector.

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Not sure what you are surprised about.. this was always going to be the case given the perverse strategies that big business use to do "business" in this country. It just disgusts me and I think that all political parties should hold their heads in shame.

The headline should be grandfathering hurts clients and advisers. Everyone knows the only party who win out of the end of grandfathering is the product manufacturers. I am curious to see if the legislation makes it mandatory that the commission be refunded to the client, because without this it will be guaranteed that the product manufacturers pocket it, just like they have done with the reduced insurance commissions.

Probably due to some lobbying by the dodgy FSC who are all about profit for the big end of town over customers and advisers.
We saw the members of the FSC all unilaterally increase premiums for existing customers after the LIF was passed and now no need for them to pass back the savings on grandfathered commissions to customers. You could not make up this corruption.

With all the talk on 0.4% trail commission being banned - I wonder if there will be a mandate to then transfer all Retail Funds into low cost MYSUPER options! Only then I would actually take this reform seriously, otherwise it is just an attack on small financial planning businesses. I guess I can keep on dreaming!

Is changing Sec 1350 of the Corps Act a valid change to the Constitution? The Australian Constitution can be changed by referendum according to the rules set out in section 128 of the Constitution. A proposed change must first be approved as a bill by the federal Parliament. It is then sent to the Governor-General in order for a writ to be issued so a referendum can occur.

I'm contributing something to the ARC fund for what its worth. I agree with their position that the institutions have been spooked by asic into immediate action and it is in their interests, we are pawns and no one is fighting for any rights we may have.

Regarding “Is changing Sec 1350 of the Corps Act a valid change to the Constitution?”.
All you legal eagles out there that love to have a go on this site, please knock me down and tell me why it is valid or why it is not valid.
It’s RUOK day to and to be honest, no I am not ok.
If the government passes this legislation what is stop them using this as a precedent for other legislation?
If they legislate to build a new freeway and say this clause does not apply to this project. They won’t compensate you for your property.
If they legislate about whatever profession you are in to remove an element that affected the value of your business. They won’t compensate you for your property.
If this is the case and people were aware there would be outrage at the Government.
This is the thin edge of the wedge.
Please someone tell me I am wrong and this isn’t changing the Constitution by stealth.
Maybe if I can make some sense out of all of this might be improved rather than OK.
This about the bigger principle of being compensated on just terms for anything you are entitled to not just Grandfathered commission.
It is about accountability for the way the Constitution can be changed.
It is about the next change that gets made that gets slipped into legislation that takes your property.
RUOK with this?

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