The Productivity Commission (PC) and other elements calling for an immediate end to grandfathered trailing commissions need to understand that banks and other product manufacturers may be the ultimate beneficiaries rather than financial planning clients, according to Association of Financial Advisers (AFA) chief executive, Phil Kewin.
Kewin also pointed to the reality that a market had been created for books of trails which could see some planners facing substantial commercial losses in the event that a future Government moved in line with the PC’s recommendations to immediately end the grandfathered arrangements.
He said the AFA was firmly opposed to fee for no service in the context of grandfathered trailing commissions and firmly believed that financial advisers who acquired books of trails should be actually servicing those clients.
However, he said that advisers who had purchased books of trails, sometimes financed by the financial institutions for which they worked, had done so in good faith and consistent with the law as it existed at the time.
Kewin said that it was in these circumstances that there should be no unilateral decision by Government to end grandfathered trails but, rather, a fully informed debate.
“The writing may be on the wall for grandfathered commissions, but there is a need for discussion and debate about the consequences not only for advisers but for clients,” he said.
“The reality is that ending the trails will not necessarily result in the money going to clients, it may very likely end up being taken by the financial institutions,” Kewin said.