Amid calls by industry funds for a rapid cessation of all grandfathered commissions, the Association of Financial Advisers (AFA) is arguing that there is a significant lack of understanding of the issue with the result that the emotional health and well-being of honest, hard-working advisers is being affected.
In a submission filed with the Federal Treasury the AFA has made clear it is deeply concerned about the consequences of the push to rapidly end grandfathering, claiming that the politicians have simply made not enough effort to genuinely understand the situation.
“We are deeply concerned that there are unintended consequences playing out right now that impact the financial integrity of financial advice practices and in turn the emotional health and wellbeing of honest hard-working financial advisers,” the AFA submission said.
It said this included “those younger advisers who have recently acquired businesses with debt, based on the valuation of recurring revenue, including grandfathered commissions”.
“We continue to argue for a more comprehensive review of the issue, a more pragmatic timeframe and an improved solution for clients who are currently in grandfathered commission products and are receiving services from their financial adviser and are happy with their current arrangements,” the AFA submission said.
“We remain concerned as to whether both the policy objective has been clearly defined and whether the winners from this exercise will be the intended winners. It is clear that there is virtually no appetite amongst the politicians or others who implement their decisions, to seek to genuinely understand this issue. We have particular concerns about the extent to which this process will deliver a fair outcome for all.”
The AFA submission also argues that the payment of grandfathered commissions is not a breach of the law as the law currently stands and that the Royal Commission erred in suggesting grandfathering fell below community standards.
As well, it said that a ban on grandfathered commissions “will disturb the financial advice relationship for many clients and will result in many no longer having access to financial advice”.
“The ban on volume bonuses will also push up the cost of running a financial advice business and therefore will ultimately increase the cost of accessing financial advice,” it said. “These implications have not even been considered.”