The Federal Government has released the regulations which will underpin ensuring that any benefits of banning grandfathered commissions flow to consumers rather than product manufacturers.
The Treasurer, Josh Frydenberg announced that the regulations would impose obligations on product manufactures to keep records on the amounts to be passed through to clients.
The explanatory statement attaching to the changes states: “Where the conflicted remuneration can be attributed to a particular client (for example, if the financial adviser received a commission for selling a financial product to that client), the covered person must provide a cash rebate to the affected retail client on a dollar-for-dollar basis”.
“Where the conflicted remuneration can only be attributed to a client group, the covered person must divide that conflicted remuneration between the affected retail clients in a just and equitable way,” it said. “The covered person may provide a cash rebate, or they may provide a monetary benefit (for example, a reduction in fees). The amount of the cash rebate or monetary benefit must be an amount that is just and equitable in the circumstances.”
Comments
Poor greedy Product provides who thought that they would get a GIGANTIC WINDFALL from the stopping of Trail Commissions will miss out. WOW!
But the poor hard done by Advisers who have bought books based on trail commissions may be bankrupted!! They may lose Securities (e.g.their homes) used to Fund the Purchases of such Books and have to start all over again at something.
SHAME on J Hayne, shame on the Government, but the forces of darkness will be rubbing their hands with glee especially the Fat Cats controlling the Industry Fund AGENDA.
If Advisers do attempt to convert trail commissions to fees then think of the enormous work for some advisers having to provide SoAs. What a waste of time for three pence a client, even though it may ultimately be worthwhile..
At least the Product providers will have to bear the enormous cost of redirecting trails.
When will the Government learn about PRODUCTIVITY and Australia's GDP and the need to cut red tape and the need to look after SMALL BUSINESS People? The Lib/Nats are really Socialists with the characteristics of Dictators. And J Hayne could not give a dam.
We are now entering the matrix where we all follow the white rabbit to learn the truth. Maybe some truth with the pill testing after all. What a total mess up and stuff up by the government, the self-interest parties when you have all but destroyed competition. Performance all the same, trustees allocating investment and allocation as per their puppet masters whims, centralised reporting of caps on how much you can save, how much you can take out. This is sounding very much like George Orwell meets the Matrix. I hope everyone likes what they get and looks back in 10 years. Remember this day.
This will never work, be impossible to manage and track accurately and be a disaster.
In a group situation it must be divided in a just and equitable way.
Large corporate super fund with 500 members......150 investment options...some in My Super accounts...many in commission paying accounts........account balances ranging from $10,000 to $750,000 with a daily unit price variation in account balances. Some members withdrawing irregular pension payments from Pre-FOFA pension accounts linked to super accounts.........
When a client comes to the adviser to ask whether the rebate or the reduction in fees is accurate on their statement....what would you like us to tell them Josh ???
Or should we just give them your phone number ??.
If the product providers are going to be forced to retain accurate records of every single client's fee rebate or reduction, who is going to be able to assess whether the records are accurate in relation to the percentage rebated at what time and based on which account balance ??
Or is the Govt going to install a full time ASIC staffer in every single admin team to monitor this process and report monthly ?
This is becoming insane.
The grandfathered commission clients will most likely be depleted significantly within the next 5 years and certainly over the next 10 years entirely through natural or recommended transition.
The cost, the financial stress and upheaval this whole process is causing is unjustified and being driven by political survival and conflicted agenda's of self interest groups.
This is blowing completely out of control.
It is not about the client....it is about a Govt who have been so incestuously maligned they are caving in to whatever will give them a middle ground position in fear of their political lives.
Before he was shafted by his own party, Malcolm Turnbull referred to the Liberal Party as " the party for small business" !!!!!!...............how far away from the truth can this comment possibly be....it is so far, you will never, ever see it.
The people who bought businesses based on trail commissions and who do not advise those clients are well known in the industry as 'register sitters'. If they bought advice books and then called it their 'business', used their homes as security to do so, then that's clearly a flaw in their own due diligence. To receive money for doing nothing is unethical, and for anyone buying a book, especially since FOFA, should have had the commonsense to see it as absolutely unsustainable.
You sadly dont understand law and i hope your not in the industry given your assumption. It was grandfathered and people buy books to expand their business and grow staff numbers and serve them for their needs. People dont need over servicing but they at times need a lot of help and this is done by most advisers. You just dont get it and are part of the problem. When can grandfathered laws be ungrandfathered? It breeches law!!
You don't understand the law if you think it is legal to charge someone for service that's just not being provided. The headwinds of change surrounding grandfathering have been gathering strength for some years, and with the outcome of the RC, we've ended up as an industry where they are slated to disappear. I am in the industry, have been for over 20 years. I've seen many many 'advisers' become incredibly wealthy from having books and doing absolutely and utterly nothing to serve those clients. They receive the trails and live large. Its this behaviour that eliminating grandfathering is to stop. I feel for the good advisers who bought books with the intention to serve clients well, but again, the writing's been on the wall for some time about abolishing grandfathering. Unfortunately, the truth sometimes can hurt.
Sure, for some. Ive bene in longer than you by a great margin and have served all you needed to be served and not over served and provided unvalued needs. You may not understand centrelink, life insurances etc given you dont understand the real world does benefit by cross subsidies. Some clients may not get a lot for some eyars and thenn they do get huge help. Thius will all go and those less able to afford will loose badly and miss out on claims they had no idea they could claim on. etc. I would just think your missing the points. It was grandfathered and it will drop off over time but making it un grandfathered is a new challenge in law and doesnt cut the mustard.
You are also misrepresenting commissions as fees for service and they are clearly different. Over the years, some of my larger clients have not ever got a fee for retirement planning and major changes and the trail has been enough for me and far less than a transaction stockbroker charges them. Do i now charge them more or provide serves that between us (client), we know that they don't need? Should we shut our doors and open only when a client needs a service? Given compliance requirements dictate that possibly only 100 clients for each adviser is the number.
Ten, just charge them for services they do need. Its pretty simple.
Amazing that charging for services rendered is such a foreign concept in this industry.
Tell that to every Industry Super Fund then who charges every single member an Admin Fee which incorporates a cost element for ad-hoc or general intra-fund advice IF the member contacts their fund.
For the vast majority of members who do not contact their fund or do not request or receive any advice at all, they are still charged that component hidden within their Admin Fee.
AND NOW THEY WANT A CARVE OUT .
Industry funds shouldnt be able to do that either but why lower ourselves to simply "but, but they can do it why cant we!"...
Provide a service, charge accordingly including a reasonable profit margin. Add value, clients pay.
Ten, you've hit the nail on the head. The advice world was about cross subsidies. The key word here is 'was'. No longer. That time has passed. Well and truly. And thats a good thing. Most clients may never have a claimable event, nor need any advice. They were subsiding those who did. That's unfair as well as unethical, and that gravy train has and will be ending. If you didn't position your business for that change, then you will need to now. If you think the opposite, then go and lobby for what you want to see happen. I wish you all the best with that.
lol. Nail on the head? I guess all people should not insure and thise that need claims just fund it for the time? How does that work? How does a client get a claim done when the solicitor doesnt take it on after no payment for 3 hours? Who finds the missing insurances that no one finds except very well equipped offices like ours. How about centrelink< no good to help those leass fortunate? You talk of a gravy train, care to share it with me? Ive not had one, nor did I dial up like many did. Im just guilty of not charging enough but thats got to change and changing twice the fee seems to what many are or will do.
We wont see eye to eye on this and clients new what i as getting and fees or commissions have been discussed. Fees are often higher, much higher than commissions.
Me prepared? Ive never bought a book and so no debts for this reason. Ive just grown to a very large size due to good service and no complaints in 30 years. thats in a small town hardly able to call a little city. So what was broken? Send me your gravy train and ill keep fixing up claims that are missed by others. You know, the claims they couldnt be bothered in or that were cancelled a few years back......but in force when injury occurred and TPD qualified. Your thoughts on claims may not be valued by me as you may be like thise i find after others have walked over.
Claims.... We always have about 8 to 12 on the go at any one time. There not all our clients either. We get 2 to 3 new ones each month.
But ive got to hang my hat up and i have had enough and its time to spend more time with family and look after my own health. Ive done quite a lot of study and im to old to be bothered going back again. Plus I have a new baby soon and thats exciting.
Ten, it may not be how you run your business -and like I've said over and over I feel for the good advisers cauught up in this - however, you need to get out more and remove your blinkers if you truly believe that register sitting isn't a pervasive issue, and has been for a long time. No tinfoil hats exist here. And, if you re-read your own comment, you'll see that you're actually agreeing with my argument. Comments like 'claims missed by others', 'claims they couldn't be bothered in'. Your words. Verbatim. Its those advisers who shouldn't exist in the industry. They were/are the register sitters. You sound like a terrific adviser, who's provided excellent service over an incredibly long time and who has a heck of a lot of product technical knowledge. You're sadly a good adviser caught up in this. Hopefully you won't be lost to the industry. I hope your licensee can help you transition across FASEA as painlessly as possible, should you choose to go that way in the end. I hope you stay. You're needed. I wish you all the best. Enjoy your new baby too.
Do you also know what the investment markets will be doing this time next year?
Did you protect all your client portfolio's in the last week of Sept 2018 and then gear them back into the market on 1st Jan this year ?
The problem is that you are using sentiment and evidence now to attack decisions that were based on the current law at the time and were completely justified at the time.
To retrospectively accuse someone of not having commonsense when trail commissions are completely sustainable if managed correctly and were accepted under the law at the time is a clear indication of your ideological position.
Unfortunately your opinion of " I told you so " using hindsight borders on pathetic to say the least.
If you buy the local supermarket, based on a history of income, customer demographic, potential to build or expand the business and use the security in your home to do so.....can you call it your "business".??
If the law changes which then allowed the multi-national supermarket chain to move in across the street and destroys your business, I am guessing your response would be that it was always going to unsustainable and they should have had more common sense.
There is a name for people like you at BBQ's all around the country and I suspect you aren't invited to many.
There's a lot of stuff I can get away with legally that I choose not to do as its not morally sound. Buying up books of thousands of clients to never actually service them fell in this basket, no matter how rich it would have made me.
It was plain greed for advisers to buy books of clients so large they couldn't possibly service them each year. Sometimes you need to call a spade, a spade.
your rusted on this issue of buying books and sitting on them. For me, i dont see it and maybe they were cheap in your group? I always felt I had enough to look after and same with clients with other planners, i always viewed it as if the client has a relationship and seems happy then let them be, there are plenty of un serviced people out there.
people who buy books need approval etc and a business plan all for approval and then they are watched to varying degrees depending on the dealer group. Why would you buy a book and not service it? Quite way to loose a lot of value if you dont. somehow you put yourself on the moral high ground but come up poor business activities and its obviously something you consider. I personally wouldn't even have thought it. You but a business, you work it and build it. Ill send you a tin foil hat and also to that other gentleman.
"why would you buy a book and not service it?"
The clear reason to not service the clients is that you can have even more clients, a larger revenue stream, without being held back by actually needing to do the work for it. Many of the wealthiest 'planners' bought books, let the revenue pay the loan down and then geared into another one. Tried and tested formula until law comes in where you need to actually have a relationship with clients to keep getting paid.
I know many planners with thousands of clients to their name. They couldn't provide a tangible service to that many clients each year, its impossible. You can have your opinion, ill have mine that we should actually provide services to get paid.
I've provided a logical and reasoned argument Agent 86. The headwinds were obvious for some time. Many - too many - in this industry have buried their heads in the sand, simply refused to see that disruption was coming their way. Lets look at Uber and the disruption thats caused the taxi industry. Thats a more meaningful example than your 'supermarket' one. Taxi cab drivers are now bearing the consequences of industry disruption. Some have left the industry, others have moved to becoming Uber drivers, others are offering service to niche client verticals. Change is the only certainty in this world and being prepared to accept it is a must. Refusing to see it as occuring is dangerous. We had an RC for a reason. There's also a name for advisers who accepted commissions for doing nothing at BBQs around the country - none of them repeatable here.
My ideological position is clear and it revolves fully around providing appropriate client service. I've already said I feel for the good advisers caught in the jetwash. Since you are so passionately unhappy about what's happening, what have you done/are you doing to change it? I'm genuinely curious to know.
Would they please ban commissions in electricity sales, phone sales, water sales, gas sales and all other essential services. Please ensure these companies refund all the commissions paid to their sales staff as they provide no service after point of sale and done ever even offer a review.
Whilst we are at it, lets force the sellers of the afore mentioned essential services to go back to university to study something they already have studies for (at the highest level world wide) to sell these products and make them do a statement of advice and act in the best interests of each and every client.
Speaking of best interests, why is this not enforced on lawyers helping clients in EVERY situation.
Note the wording. " any benefits of banning grandfathered commissions flow to consumers"
It doesn't say $ benefit or refund. It says benefits.
So product providers will spend all of that money on a new calculator, or IT system that benefits those members and then piggy back that system to another part of the business. Offsetting that spend.
The product providers will win out in the end.
Josh Frydenburg refers to where " a financial adviser received a commission for SELLING a financial product to that client"....what.... in 2008 Josh !!!!!!!!......and it wasn't SELLING Josh......it was a structured and advised process based on the clients needs and objectives.
The trail commissions paid since the initial advice payment have been for the ongoing service and advice delivered to those clients, NOT for SELLING the client anything.
The continued reference to so called " conflicted remuneration " is convenient as it immediately labels the receipt of that remuneration as self driven, untrustworthy or unreliable.
It is simply not conflicted because it is a commission payment.....it would be conflicted if the adviser was recommending a strategy that would put their interests before the interest of their client.
The receipt of a commission payment in itself is not conflicted until proven the instrument or process that generates that commission payment is in itself conflicted.
The term BEST interest is subjective at any stage and can be easily attacked because there are so many variables as to the definition of "best".
In addition, the financial services landscape is a dynamic and constantly evolving platform that results in the best position for the client at any stage being subjective.
Would you recommend a client move superannuation funds every 2 years or less when a new product or platform was developed or released that reduced admin fees and resulted in lower insurance premium costs ?????
Is that in the clients best interest ?
There are now so many contradictory components of the provision of financial advice it is becoming impossible to remain confident of playing within the correct parameters no matter how diligent and detailed.
It is imploding in a sea of red tape and misguided and selfish agendas.
How dare these figureheads like Josh criticize our Advice Industry when they don't have a notion of what it is about! Sales is incidental to the business by the time we data collect, analyze clients' assets and liabilities and likely future situation,, consider family relation ships and responsibilities, construct proper estate Planning scenarios, etc., etc. And finally we come up with the best investment solution/s. It is complex work with many serious aspects.
Nothing like an Industry Fund being a default fund favored by the Employer because of some sort of incentives, possibly, and seeing the money pour in and simply "managing" it in the "cheapest" possible way. Industry Funds are conflicted all the way. Without sound and comprehensive advice, "members" of Industry Funds have not got a hope.
Changes in Laws and Regulations must be good for the soul for those who possess one.
The Government, having stuffed up everything retrospectively in recent years, what we are doing now will most certainly be wrong as a result of more retrospective Laws and Regs in a few years time; if not later this year, if we get HARD LABOR!
So get used to it all everybody.
In the meantime we will have been Governed by several Ministers for Finance and maybe several Governments too.
All while Gary Weaven and David Whitely and the Hon Peter Collins relax and see the billions role into a few Industry Funds, where goodness knows what happens to money after Commissions have been paid to Insurance Companies, kick backs received from Property developers, property infrequently valued, and the Unions have got their take via Trustee Fees and what ever else they get.
Are we bitter and concerned? Yes!
Do we need relief? Yes!
When do we want IT? NOW!!!, (as the Unions' chant goes).
Josh! Have a brain and give some thought to what is going on. Do not rely on Public Servants for advice. They were probably appointed to their jobs by Labor a few years ago and YOU have not cleaned them out. This is a serous Industry which does look after most Australians ineligible for full Centrelink Benefits. Clients need peace of mind in their retirement; not constant change which whittles away their savings by changes in Assets Tests, Income Tests, Franking Credits, Loan Regulations (affecting Home Equity Loans), SMSFs, etc.
And then Advisers have to find ways of stopping the Residential Care Industry from ripping off those in Residential Care.
What a mess we are in!!!!!!!!!!!!!!!!
And I am sure members of super funds, closely held parties or past trustees, senior management have been able to negotiate great off the plan discounts for apartment properties not readily available for others, or maybe they were able to get the enhanced and upgraded fit-outs at no additional cost.
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