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The payments made from financial services and product providers to Australian Financial Services Licensees (AFSLs) will not form part of the Financial Planning Association’s (FPA’s) current review of remuneration practices in the industry.
The payments made by product providers and investment platforms — otherwise known as volume bonuses and shelf space fees — were questioned last week in a public submission to the parliamentary joint committee inquiry into financial products and services in Australia.
These payments appear to be passed on to financial planners in some cases, retained by licensees in others, or prepaid to licensees prior to volume targets having been met. Such payments are understood to be causing headaches for the administrators and receivers of recently collapsed management investment schemes.
In his submission to the inquiry, financial planner Neil Kendall called for platform rebates paid to financial services licensees to be banned. Kendall, managing director of boutique planning firm Tupicoffs, told the inquiry rebates from investment platforms were substantial, influenced investment dollar flows and were not properly disclosed to clients.
FPA chief executive Jo-Anne Bloch confirmed to Money Management that the current review of remuneration practices in the financial services industry would focus on arrangements between financial planners and their clients, rather than tackling alternative remuneration (or soft dollar) arrangements, or the issue of volume bonuses being paid at a licensee level.
Bloch said at this point the FPA has chosen to “focus just on the remuneration paid by the client to the planner” and on the “relationship between the client and the planner and getting that right”.
The FPA and the Investment and Financial Services Association share a joint code on practices regarding the disclosure of soft dollar and rebate payments. Bloch believes that in recent years the industry has “moved a long way to cleaning up inappropriate practices, having good disclosure and changing behaviour”.
“Having said that, we’re aware a number of members have said we should be looking at those [issues] more closely,” Bloch said.
“We’re also aware that [the Australian Securities and Investments Commission] is looking at alternative remuneration, so we expect to be needing to have a look at both issues going forward, but I can’t really say when.”
