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FOFA determined a line in the sand and grandfathered commissions on existing business were allowed to remain in place under law. The basis of allowing the retention of these legislated payments was to not to deliberately disrupt the structure of business for existing clients which may be detrimental and disadvantageous and to allow the eventual and progressive transition to a new regime over time whilst still allowing advisers to receive remuneration for services and advice provided to those clients.
If the Govt were to proceed with a mandatory cessation of these legislative payments, it may be deemed a deliberate acquisition of property or the removal of the right to receive these payments.
As such, it may be deemed that fair compensation be paid for the deliberate removal of the rights to that property or continued payments.
The arrangements offered must be fair or such that legislature could reasonably regard them as fair.
Interestingly, the judgement of fairness must take account of all the interests affected, not just those of the dispossessed owner. So, if a client's interests are also affected detrimentally, there may also be a case to argue that they also be included in fair compensation.
If a change in legislation resulted in the adviser no longer being able to receive the grandfathered commission payments and the product provider retained those commissions, the change in law would be effectively dispossessing one party and allowing a second party to retain the dispossessed party's remuneration.
The recommendation of the Productivity Commission and all the self interest groups that are calling for adviser's blood are not based on logic and thought, but based on their ideology and opposition to the term "commission".
The mandatory removal of payments that advisers currently have a legal right to receive and retain will be entirely detrimental to clients who receive advice and service often for a much lower cost base than the alternative and remove large portions of business value that advisers have either purchased in good faith and/or built up over many years.
If this were to occur, then it is only fair and reasonable that fair compensation is forthcoming based on the deliberate change in legislation.
The grandfathered commissions should be left to run their course over time and they will eventually phase out naturally as advisers transition clients based on their best interest duty obligation.