The Financial Planning Association (FPA) has indicated it will open discussions with the Treasury about whether some platforms should be regarded as pure administration tools, amid fears the total ban on volume rebates will jeopardise the existence of independent dealer groups.
The current law defines all investment platforms in the market as products, which means they too will be banned from passing volume payments down to dealer groups as part of the Government’s proposed Future of Financial Advice reforms package.
Speaking at a media roundtable, the FPA general manager policy and government relations Dante de Gori (pictured) said the product-neutral administration platforms were a rarity in the current market, but stated they should be allowed to pass volume rebates down to dealer groups, provided it was under a conflict management process.
In its official response to the proposal, the FPA stated a “ban on volume payments from platforms to dealer groups/licensees would have a significant effect on the structure of the financial planning industry; this would likely consist of a significant loss in the number of independent dealer groups and the further domination of the financial planning industry by institutionally owned, vertically integrated organisations, which control both platforms and asset management”.
De Gori added the FPA believed Treasury needed to separate pure, product-neutral administration platforms from those that were not.
“The question we are juggling with is this: is removing one particular conflict and replacing it with another appropriate [when you consider] losing the financial independence of dealer groups?” De Gori asked.
FPA deputy chief Deen Sanders said the association wanted to encourage the clarification of the Australian Securities and Investments Commission’s regulatory approach to platforms.
Deen also added that, under a conflict management process – a strict regime which would be put in place to manage any potential conflicts – it was also conceivable that the “institution can build a platform that is product and volume-neutral”.
“We think it’s possible and we want to see the law support that sort of development, which was not contemplated yet in these reforms,” Deen added.
