It is not the fault of financial advisers that grandfathered commissions continue to be an issue in the financial planning industry with neither the Government nor the regulators having expressed an expectation as to how quickly they will decline, according to the Association of Financial Advisers (AFA).
The AFA has told the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry that despite all the calls for the removal of grandfathered commissions, no one had put forward a coherent explanation of the policy objective.
Further, it said that those organisations which had been pressing for the removal of grandfathered commissions had little or no skin in the game and that this was symptomatic of the debate having become “out of control”.
The submission said the AFA was perplexed as to why in the context of a lack of case studies on issues in relation to grandfathered commissions and the lack of investigation by the Australian Securities and Investments Commission (ASIC), that bodies like the Australian Bankers Association and the Association of Superannuation Funds of Australia (ASFA) were proposing the removal of grandfathered commissions.
“ASFA have suggested that grandfathered commissions should be removed within a year of legislation. The ABA have put no timeframe on it,” it said. “To the extent that it would appear that there is a prevailing view that all stakeholders need to offer up something in response to the Royal Commission, it seems that these groups have made the offer to remove grandfathered commissions which impacts an area that is largely unrelated to them.”
The AFA submission said that the organisation had asked the question as to whether the suggested removal of grandfathered commissions was to facilitate the transfer of clients from uncompetitive products to competitive products, which was something the AFA would support.
“… or is it simply to prevent certain payments to financial advisers?” the submission asked.
“The development of such a strong level of commentary and demand for change on this issue in the absence of a clearly articulated policy objective is a sign of a process that is now out of control,” it said.
“How is it possible that an issue that has had little focus over the five years since the start of FoFA and has not been the subject of any case studies at the Royal Commission is now apparently on the top of the list of reforms for so many different stakeholders? This is a question that we would suggest needs to be asked by more than just the financial adviser community.”