Grandfathered commissions should be outlawed under a 12-month phase-out, according to major superannuation industry body, the Association of Superannuation Funds of Australia (ASFA).
ASFA has used a submission to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry to state that it “supports the introduction of a termination or ‘sunset’ date for grandfathered commissions with the length of the transition phase of one year”.
Answering specific questions posted by the Royal Commission, ASFA said it believed appropriate transitional arrangements would permit an orderly transfer from trailing commissions to upfront fee for service and ongoing opt-in arrangements in relation to financial advice.
“Importantly, they will also facilitate superannuation businesses transferring members to more modern products, in their best interests,” the submission said.
However, in doing so, ASFA said there were a number of transitional issues to consider, and that the focus should be on getting members out of legacy products and into rationalised, streamlined products with scale and commercial benefits.
On the question of financial advice, the ASFA submission said the organisation supported “maintaining the status quo for general, intra-fund or scaled advice which gives trustees the option of including the cost of these types of advice in the general administration fee or charging an additional fee at their discretion”.
“While we acknowledge that not all members will make use of this service we consider that making it strictly fee-for-service will increase the costs charged to individual users,” it said. “This would discourage members from making use of it which could leave them worse off individually and as a group if, for example, the fund determined not to provide such services due to very low take-up rates.”
ASFA said it supported members being able to pay for personal advice fees from their superannuation fund balance subject to the sole purpose test and Future of Financial Advice (FoFA) constraints.
It said that with regard to ongoing financial advice fees, there was already a raft of opt-in, fee disclosure statement and other rules around ongoing fees and there were also some exemptions if the financial planner complied with a relevant ongoing fees code.
“For example, the Financial Planning Association (FPA) has an ongoing fees code with ASIC approval that exempts planners from some requirements,” it said. “ASFA considers that given the evolving state of financial planning regulation and standards there may in the future be a need to look at the potential benefits of stricter rules for opt-in requirements, benchmarks and reporting, and/or a link to the new Financial Adviser Standards and Ethics Authority (FASEA) that is being developed now.”