End grandfathering this year says ABA chief

The Australian Banking Association (ABA) has declared that the implementation of changes to grandfathered advice commissions should happen this year.

ABA chief executive and former Queensland Labor Premier, Anna Bligh has told a Sydney forum that while some of the recommendations of the Royal Commission will require “extensive consultation and consideration” there are others such as ending grandfathered commissions which can be implemented quickly.

“Without doubt, a number of recommended legislative reforms, such as changes to mortgage broker remuneration, enforceability of Codes and extending [the Bank Executive Accountability Regime] BEAR to product life cycle will require extensive consultation and consideration,” she said.

Related News:

“Equally, there are many that can and should be implemented as quickly possible,” Bligh said. “An end to grandfathered commissions in financial advice, a nationally consistent farm debt mediation scheme and changes to ongoing advice fees, among others, should all happen this year.”

“Australians should expect that whoever wins the next federal election will have a banking reform bill, with these and other reforms, in the Parliament within their first 100 days of being sworn in.  I’d call on both sides to commit to taking this action,” she said.

“This will make for a busy second half in 2019, but the circumstances warrant action and urgency,” Bligh said.




Related Content

Banks cut staff bonuses, incentives

Royal Commissioner Kenneth Hayne was tough in his critique of financial services staff remuneration, but The Australian Banking Association (ABA) has ...Read more

ABA moves to protect vulnerable clients

Elder financial abuse, violent relationships, and unexpected long-term illness are all issues that the Australian Banking Association (ABA) hopes to a...Read more

End grandfathering this year says ABA chief

The Australian Banking Association (ABA) has declared that the implementation of changes to grandfathered advice commissions should happen this year.A...Read more

Author

Comments

Comments

of course they are calling for the change.....wouldn't have anything to do with fattening their profit margins would it....who can trust anything to comes out of banks mouths or from the ABA

So, let's be clear about this. The banks and their wealth divisions created the commission environment. They recruited advisers and paid them via commissions. They encouraged advisers to purchase businesses from other advisers and lent them the money to do this. They now want to destroy a significant source of legal revenue paid by them to these businesses, virtually overnight. And potentially force businesses that have supported them for many years into liquidation, without providing adequate time/opportunity for the advice businesses to convert these clients to 'fee for service' clients.
All this at a time when compliance is at it's most onerous ever, and the cost/time taken to engage or re-engage with clients is the highest in history.
There is no compensation suggested for the breach of contract they propose.
I think everyone agrees that removing grandfathered commissions, or making them payable under an opt-in arrangement, is in the interest of consumers if it occurs over time. Sending hundreds of advice businesses broke is not good for consumers or the economy. Or their thousands of employees and their families.
Is this just a ploy for them to improve Bank profitability? Like the recent move by CFS to cease paying advisers to provide Intrafund advice? That's destroying some businesses overnight.
Time for advisers to reciprocate? Maybe show the banks the same level of support they show us?

Will the banks commit to taking no action with respect to financial advice practices, where their loans are placed into default because the ban on grandfathered commissions results in the value of the security on the loan attributed to grandfathered commission clients being reduced to zero? The banks are failing to think about the consequences of their actions on their financial advice business clients. The banks need to make a statement on how they will treat financial advice practice loans as a result of the impact of the Royal Commission recommendations.

Grandfathered commission payments for Pre-FOFA product are legally able to be received under law and legally able to be paid under a distribution contract with the product providers.
If the law is changed to ban these payments and the payments are then received by the product provider rather than the licensee or adviser, it will be an acquisition of property.
As such, the product provider, being the recipient of that property, be it tangible or intangible, would be liable to pay compensation on just terms to the deprived parties.
In the interim, product providers are currently either turning off commission payments as speak or contacting advisers clients suggesting they turn them off.
This would be in breach of current distribution and remuneration agreements as the product provider is seeking to influence a clients decision with no basis for doing so as the current law allows these payments to be received by the adviser.

Of course the ABA wants to end grandfathering early. It speeds up the process so that they can stop paying advisers and keep the commission themselves.

And this is exactly what will happen ,the banks will not be passing this back to clients as a discount ,they will claim it’s a soft wear ,system thing so we can’t ,so this will go straight to their bottom line ,Anna Bligh your not so transperant now!

You are right. Even though it has been legislated that the banks have to pass the $ back to the consumer they will have to increase their fees by about the level of commission paid to the advisers to refund these commissions to the client. The client will end up paying more and they will also be without advisers.

I dont understand why this needs to be legislated. It is so easy to change superannuation providers. Clients get fee disclosure statements so they are aware they are paying an inbuilt commission and added on commissiosn. These policies were set up when that was the way advisers were paid and many times the upfront fee was waived as the adviser would recoup the costs of the advice over the long term.

Why would anyone be an adviser anyway these days. There is so much compliance work every time a client calls with a question that the clients and regulators dont know about and then we are supposed to invoice the client for 2 hours work to answer a simple question because of the paperwork.

Why dont we all just become mortgage brokers and get paid trailing commissions for NO ONGOING WORK whatsoever.

Typical changes that impact intermediaries such as brokers and planners the banks are all for to be put in place ASAP.
Yet they are the ones that created the mess with clients in call centres paying fees for no service. Now they are distancing themselves from or removing themselves from the advice side but product providers will continue to hold clients money in products owned by them without providing sufficient opportunity for an adviser to review any potential legislative relief as sought by the AFA and determine what continues to be in clients best interests considering grandfathering, CGT etc.
Once again the elephant in the room of vertical integration and an actual advisers not being attached rather than a 13 call centre not addressed. In the end the consumer and small business will bear the brunt of their failings.

Yes, an ex Labor Politician occupying a Sinecure WOULD be keen to feather her own nest by robbing Advisers of Commissions which have been built into products, are an expense of the Product Providers and which will never be passed on to affected clients. MARK MY WORDS!
Any arguments that the Product Providers will hand the equivalent to these Commissions back to clients is a fanciful
proposition, judging on the past practice of Banks, especially.
No doubt the said ex politician will be oblivious to the loss of hard earned income by Advisers just as J Haynes and his QC and SC assistants were.
Kick Advisers for six and distract from the real issues; the greed of the Executives in Banks and other Institutions!

Of course the banks want commissions gone as soon as possible. It plays directly into their hands. Small businesses will be destroyed and they will profit. How is it that Hayne and the mainstream media are so blind to this?

The product providers can purchase commission clients at 3 times and reduce the product fee by the commission amount and can then turn off commissions the day after. Could be done next month if they were serious.

Why the rush? Perhaps it is so no one stops to ensure that the benefit is passed to clients.

But where does the" commission" go.......back to client to in or to the bank's back pocket to maintain profits

I am confused, what is the difference between "grandfathered commissions" and "mortgage broker remuneration"?

Both are paid by a product provider to someone who sold their product!

Why is one bad and the other good?

I'm not sure what the difference is but happy for a regulator to explain it. Would also like to know how a fee charged to everyone for intra fund advice is not a commission structure, also how intra fund advice is not conflicted and why it isn't fee for no service? And why gearing into property via a mortgage broker or directly via a bank does not require an SOA. I suspect the answer is be an unlicensed financial coach.

More career public servants who have never had to earn any money themselves putting their noses into our business. Once again a person that has never spoken to clients about this exact matter, or even done any financial planning at all. The ABA has probably caused most of the issues we have with advice at the moment! As a matter of fact you could say the ABA has caused ALL the issues we have right now. Bunch of hypos

Anna is CEO of the ABA. Her qualifications being as Queensland Labor Premier and the architect of the wipe out of the Queensland Labor Government in March 2012 when 51 labor seats were reduced to 7. Some Premier; some CEO. Just who do people like this imagine they are by decreeing that Advisers across Australia be forced out of business. Let's wake up and start campaigning against such people. She can have no appreciation of what business if about, namely the fact that some advisers have mortgaged their homes to buy books which SHE wants to make WORTHLESS! Loss of business, loss of homes, but that's OK. She will deserve a bonus!

AFA or FPA need to start campaigning. We advisers are good at looking after our clients. We are bad at politics and propaganda. Clients value our advice and have no issues with our FDS and signing opt-ins.

We are the natural competition of product providers and legislators. Think about it. We cost them money for the benefit of our clients.

We all place our clients into better performing and lower cost products. This costs product providers money and they need to increase their spend to improve value for our clients. Or we move them. That is not what they want. They want no advisers so that they can retain clients in outdated overpriced products and lower their spend so they can increase their profit.

We all recommend strategies to clients to reduce their tax and increase clients age pension entitlements. This cost the government money in reduced tax revenue and increase social security spend.

It also makes them look foolish when they change a super law, and we as advisers work a new way to benefit our clients under the new law. Then they need to amend it because we identified the opportunities to improve our clients position and recommend it to our clients.

They both want us gone because we improve our clients situations at their expense. And they don't like it. So they try and limit our reach by making us out to be the bad guy and increasing the adviser delivery burden. Well, that's what i'd do to a competitor anyway. Master politics.

Congratulations to us for doing so well for our clients that the rules keep being changed because we have done our jobs and applied the existing rules to our clients and the legislators can't afford our clients to benefit.

Imagine if we could give advice simply to more people. Is that why mums and dads are being legislated out of the advice market because we actually do add value to them at the expense of someone else's revenue? (governments, banks and industry funds. Are they 'all in this together'?)

Can the ABA commit to refunding ALL fee for no service clients by the end of the year? Why not?

Dear Adam, I think the banks will refund all the commissions. For the bank this will be a nil sum exercise, but it will make ASIC go away. So they win ..... As others have said it may hurt smaller AR's who have used commissions appropriately, but that is not the bank's issue.

Seriously Anna Bligh - little wonder you head the good ship Bank Bounty!
What an absolute disgrace you are and the organizations you head and represent. On one hand you steal from the customers and then you steal from those who brought the customers to you.
I'm not sure how you people look yourself in the mirror without shame and guilt for what you have inflicted on the Australian people for the sake of greed and profit all done in your pursuit of every last dollar of consumers.
Shame on you! Seriously, the lot of you should be cast adrift into the ocean like the namesakes you bear - mutineers!

We have the mechanism to manage grandfathered commissions - it is called 'opt-in' and applies to advised clients. Simply include grandfathered and clients who value the service will continue to pay their fees to an adviser. Those who dont, can have their commissions rebated.
This debate should be about fees for service not protecting revenue streams for banks or advisers. Ripoll and Shorten stuffed this up with FOFA so now we can finally clean up their mess and clients will get what they pay for.

Please I am begging advisers quit the FPA come June and send a message we are professionals. Despite all this Government intervention you keep paying memberships fees to the FPA year after year. You can post here but yet you can't send a message to the FPA asking them to distance themselves from platforms/products. You're an idiot aren't you.

The only thing to save you now, is to leave the FPA, wait for a professional adviser association (not connected to platforms/product) and join. We need to do this in 2019 before the new Government commences.

Add new comment