Disclosure obligations under the proposed CLERP 6 legislation may unfairly dis-advantage some advisers, according to Association of Financial Advisers (AFA) national president John Hibberd.
Disclosure obligations under the proposed CLERP 6 legislation may unfairly dis-advantage some advisers, according to Association of Financial Advisers (AFA) national president John Hibberd.
Hibberd says that on the AFA’s first reading of the legislation, it appears that while people who are salaried advisers won’t have to reveal the commission on product sales, those who are self-employed will. This, he says, disadvantages advisers who are not employees.
“It’s unfair because if I’m self employed, I have to reveal the benefit. How-ever, if I’m an adviser employed by, say, a bank, I don’t because I get a sal-ary.”
While Hibberd concedes that employed advisers don’t usually receive commissions, he argues that a commission is still being paid by the client and should there-fore be subject to the same disclosure obligations.
“Most products have commissions built into them,” he says. “The product price is not reduced if no commission is being paid to the adviser. What usually happens is the commission is kept by the company to pay the adviser, so that adviser is still being paid to deliver advice, and the client is still the one paying for it.”
Hibberd says there are already situations in the financial services industry where the absence of commission in the transaction is portrayed as an advantage.
He says another concern is not that if a consumer uses a salaried adviser, but they do not have access to the same level of information about adviser remunera-tion. “Consumer sovereignty is compromised,” he says.
The AFA has written to the Minister of Financial Services and Regulation, Joe Hockey, outlining the concerns.
The letter said, in part, “We are concerned that the proposals may unfairly dis-advantage our members in the marketplace. This would occur in situations requir-ing an adviser entitled to commission to disclose this commission, whereas a salaried adviser recommending, possibly the exact same product would have no disclosure obligation.”
Round table discussions between the minister and the AFA will take place this week.
