Financial services licensees should be made to report on annual basis the percentage break-up of practice income between grandfathered commissions, life insurance commissions and adviser service fees, 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 such a reporting arrangement is preferable to suggestions that grandfathered commissions be outlawed.
In doing so the AFA has claimed that the level of grandfathering is not as high as is being portrayed.
The AFA submission said it believed that transparency around grandfathered commissions resulting from such licensee reporting would be an incentive to address the issue.
The submission suggested that licensees should undertake investigations into clients who had been left in uncompetitive legacy products and take action to ensure that clients in grandfathered commission products were receiving services.
It also suggested that ASIC undertake research into the extent of grandfathered commissions, the extent of issues with legacy products and the factors that were preventing clients being moved to more competitive products.
As well, it suggested that product providers should give greater consideration to the options to rationalise legacy products and that the Government should remove or sensibly reduce (to a cost recovery level) exit fees, provide CGT roll-over relief for clients in grandfathered commission paying products and provide transition relief for Centrelink deeming of income stream products.
The AFA submission said the Government should undertake a detailed review of grandfathered commissions and potential solutions, if the extent of grandfathered commissions had not materially declined over the next five years.