Grandfathered commissions involve no misconduct, no fees-for-no-service, and no breaches of professional standards or community expectations, Lifespan Financial Planning believes.
The financial advice network said it had backed the industry’s constitutional challenge to legislate the banning of grandfathered commissions by contributing $10,000 to the Adviser Regulatory Fund (ARF) set up by the Association of Independently Owned Financial Professionals (AIOFP) to defend property rights of advisers.
It said Lifespan would top up this fund with a total of 50% of the individual contributions made by its 180-adviser network.
Lifespan founder and executive chair, John Ardino, said banning grandfathered commissions would increase the cost of receiving financial advice and lower consumer access to advice significantly when the opposite was needed.
“The government adopted these flawed recommendations from the Hayne royal commission without any objective justification that grandfathered commissions have caused any harm to clients,” he said.
Ardino said the recommendation to abolish grandfathered commissions was invalid because the Royal Commission failed to follow the directive which required considerations to be given to the impact on the economy, the cost and access to advice, competition and other factors.
“Grandfathered commissions are legitimate income supported by the advice to the Labor government given by the Solicitor General in 2011... In effect, he [Bill Shorten] said that these commissions constituted property rights protected by the constitution and that the government could only abolish them by compensating planners on just terms,” he said.
“The government and Commissioner Hayne have falsely argued that this 2011 advice no longer applies. Moreover, there is a real risk that adviser property rights may be wiped out unilaterally by fund managers feeling obligated to stop paying grandfathered commissions, potentially in breach of their distribution agreements.”
Ardino said advisers might have to litigate against fund managers if they could prove the managers acted improperly.