A senior federal opposition front-bencher has signalled that financial planners who have purchased books of clients on the basis of trailing commissions can expect little sympathy from a future Labor Government.
Shadow Assistant Treasurer, Matt Thistlethwaite made his party’s position clear during a hearing of the House of Representatives Standing Committee on Economics when he suggested that financial planners should have known better than to have taken out loans to acquire books of clients.
While questioning ANZ deputy chief executive, Alexis George during the committee’s review of the four major banks, Thistlethwaite said he had been approached by an affected planner but had little sympathy.
“I recently had a financial planner come up to me at an event and say: 'You guys have got it wrong with grandfathered commissions. In a lot of financial-planning businesses, people had borrowed money to buy the business on the basis that the grandfathered commissions were part of the profits of the business, the structure of the business, and the reason why they bought into that particular business',” he said.
“Obviously I said to the person: 'Look, I've got little sympathy for you. You've been on notice about this, and, if you'd done your due diligence, you should have known about this’,” Thistlethwaite said.
He then asked George how prevalent such circumstances were where “people have bought into these sorts of businesses with their eyes closed?”
The ANZ deputy chief executive said she was not the right person to ask because she had not been involved in too many smaller acquisitions and ANZ did not own any adviser groups any more.
Comments
The Labour attitude is entirely different when people who borrowed money to invest in property or a business hit hard times or find the property is worth less than they paid, Labour then blame the banks and demand the loan be forgiven.
To apply their analogy to this situation the bank that provided the funding should have to forgive the loan. The bank should have been aware of the risks.
This was also the view proposed by Hayne so why the changed attitude when dealing with small business.
The reason, planners are regarded as the devil by the Labour party and their industry super fund cronies.
Matt is right. Everyone knew that grandfathered commissions were under scrutiny and would almost certainly be banned. If you bought a book with grandfathered commission in the last few years you can’t be that smart and probably wouldn’t have passed the FASEA training anyway.
However. If they are going to ban asset based fees for advisers then they need to ban asset based fees in all super products including the industry funds
.....And they will also need to ban the ATO from taking percentage based taxes, real estate commissions, lawyers charging percentage based fees to administer estates....the list goes on.
Intra Fund advice fees for no service are still OK for Bill Shorten's Industry Fund mates.
You are Wrong. Trail commissions were grandfathered. The intention under grandfathering was that trail commissions would eventually fade away and that was happening. People made business decisions based on the facts that the original intention was for grandfathering to continue. Abolishing trail commissions will cause extreme suffering for a significant minority of financial advisers, their staff and their families as they lose everything they have worked for. This will lead to mental heath issues and definitely suicides. The ALP and Industry Super Funds believe they are justified in destroying financial advisers because financial advisers are evil capitalists who take advantage of others and therefore deserve to be eliminated. Their motivation is driven by Marxist ideology. You need to wake up and realise that the left HATE financial advisers. They want you eliminated. Asset based fees will definitely be banned. In fact you will not be able to receive a fee from a superannuation fund unless the client authorises it directly with the fund and the fund determines the fee to be an appropriate amount. The fee will only be paid once a year in arrears. If the client does't sign, to bad for the adviser, you have worked for nothing. Your cashflow will be a nightmare. At this stage the super fund trustees are waiting for guidance from ASIC to determine what an appropriate fee is. So this means that ASIC will be setting your level of remuneration. You can guarantee it won't be enough to survive on. Meanwhile ASIC is increasing your annual ASIC funding levy so that you can pay for them to take legal action against you. So given the facts mentioned above should we question your intelligence for even wanting to remain in the industry..
It's not 'advisers' they hate, it's well informed consumers they hate, and they see advisers as the one delivering well informed consumers to make personal and informed decisions - this will often work against their own agenda of controlling all of the money - so as a result of their agenda and their need for consumers to make decisions based on 30 sec TV add, they hate that we get in the way, and see that we're not too difficult to get rid of. They've developed their smoke screen, and they're now working away.
"You are Wrong. Trail commissions were grandfathered. The intention under grandfathering was that trail commissions would eventually fade away and that was happening. People made business decisions based on the facts that the original intention was for grandfathering to continue."
Yes, they were 'grandfathered'. What does that mean? Doesn't it mean that's been considered, legislated upon, and can now be relied upon as law? that's what i thought.
I'm worried about what this means for the future of any 'grandfathering'. Is there a precedent for a 'grandfathered' law to be un-grandfathered? If there is i'm very keen to learn more about it. If there is not, doesn't this then create the precedent for any grandfathered law to become un-grandfathered, and therefore grandfathering now means nothing in the legal system.
Your spot on Tony. Its a disaster what will occur to a vast amount of Australians and the loss of guidance and wisdom plus experience which cant be taught. Mental health and suicide.......i know only too well and hope I can deal with it.
I can feel a recession coming on...
A very deep and destructive recession. But that will satisfy the socialists.
This is a disgusting attitude. Regardless of your opinion on the topic, some show of empathy would have been expected especially from a politician.
Shows they are so out of touch with emotional intelligence. No wonder populism in politics is taking over the world.
Same attitude against farmers when they banned live exports. "It's your fault we decided to change the rules". Easy to think like this when you have never had to be accountable or deliver on anything in your life...
Once again a typical arrogant comment from somebody that has never worked in business and has spent their entire"professional life" in the sheltered workshop of the Australian Workers Union and Labor party where playing Robin Hood seems to be the popular act. The reality is, whether you agree with commissions going or staying, commissions pre 2013 were grandfathered under FOFA legislation by a then Labor government. Now, post RC, both side of Government plan to move the goal posts again in a short space of time, without any resolution of legacy issues around moving clients, rebates passing through to clients or clients having access to affordable advice or service once this is done. This is no different to say a WA rock lobster fisherman borrowing to buy a license, pots and a boat and then seeing the value of these assets and income plummet because the Government suddenly changed the quotas.
I don't get commission but experiencing crying people when I turned off commissions I'd say this.
Dear Client,
For the last decade the services you've received have been paid for via a commission. This equates to $375 a year. In some years the cost of delivering those services have been much more and in other years the cost of servicing has been less. In return for this commission we've provided Centrelink services, refund of franking credit returns, and we've been available to you during those years when you've called concerned about your portfolio. We've also spoken at times about legislation changes. Whilst our face to face contact may not have been annually it has in most cases been every couple of two years or even once every three years with emails and calls inbetween. Due to Government legislation now clearly defining what a service is, frequency of meetings, and how you should pay for those services we must turn off those commission and end our relationship. As our cost to provide those Government defined services is more than the commission received we must end our relationship. Thank you and Goodbye.
A well thought out letter, I think close to the standard to be distributed
Matt Thistlethwaite's attitude and lack of understanding and empathy is a disgrace.
However, you would expect nothing less regarding self employed financial advisers from a career politician and union rep.
Interestingly, Matt's profile on his website states that " Matt understands our community and wants to make it an even better place to work and raise a family" and " Matt will stand up for all of us " !!
So, any financial advisers in the Maroubra area may want to arrange a time to meet with Matt at his office at Shop 6, 205 Maroubra Rd. and explain exactly how our business works and clarify the value that is delivered to many many clients often at a heavily discounted pricing model if remunerated only via trail commissions.
It would be interesting to report back if Matt is prepared to meet with his local planners who are an integral part of the community of which Matt claims he represents.
Politicians, to an extent are becoming more ignorant and have not bothered to learn why or how trail commissions began. In the early 80s, we initially received either 100% up front commissions moving to 80% first year and then 20% in the second year. Commissions changed again to a lesser up front with deferred ongoing commissions which helped with future cash flows. Contracts and agreements were put in place. Unfortunately some politicians are elected not because of their talents but due to their snake oils sales skills. We can only look at the current turmoil within our economy. We are a rich country, but rather than trying to build up wealth, we are being torn apart by pontificating ideological politicians who cannot see the light beyond the trees. There are financial planners who took the risk of borrowing large sums to purchase practices for their long term. To not have sympathy for them is doing them a grave injustice and for those whose lives evolve around schadenfreude, a pox on you and all involved in the dismantling of our wonderful industry.
The Labor party cares less about the financial planning profession than does the Liberals.
It is a pity that the Liberals have virtually sold us out and industry super all the more powerful after the Hayne Royal commission. it is no wonder so many financial planners are on stress leave claims selling their practices because they are sick and tired of trying to second guess their future.
And throughout all this publicity you're still comfortable with the FPA's handling on this issue and you'll pay your membership fees in June. Regardless of your own personal stance on commission you'd have to give them a FAIL wouldn't you. Throughout the years I'd fine it's hard to claim they're "professional" or leaders in this area.
No politician in the ALP has ever had a real job; so they do not understand business risk. They are lawyers in the main, who have worked with the union movement, and have enormous empathy for the Industry Funds, not for people out there having a go. These same people they purport to represent, the Aussie battler. Heaven help us if they implement all this crap when they get in. No understanding of how anything works, and its flow-on effects.
Lets demand Josh Frydenburg make comment in response to Matt Thistlethwaite's commentary.
Unfortunately I don't expect too much from him in regard to commitment and backbone on this issue.
The pure and simple fact is this:
Grandfathered commission payments were approved under law in 2013 to be continued to be paid and continued to be received with a line in the sand being drawn at that point.
The line was drawn because FOFA represented a transition of new business from that point with a view that the grandfathered commissions would not continue to exist forever and most likely be eventually replaced on a needs based basis or through natural attrition.
There was also quite obviously an attitude at the time that removing these payments would completely disrupt consumer's current products and many adviser's remuneration.
So, if you were an adviser who purchased a business in say 2014 or 2015 based on good faith and the law as it existed and had a repayment schedule of 4-5 years and now may be getting close to owning that business, it may well be the case you have taken no real income from those trail commissions for that period and utilised these to fund the purchase of the business, but still delivered the advice and service to the clients.
This is because based on the LAW, you were prepared to invest in your business and build for the long term.
So now Matt Thistlethwaite AND the Liberal Govt want to say " too bad, you should have always known the LAW would be changed RETROSPECTIVELY" and you will just have to wear financial ruin and a valueless business.
THIS is a disgrace of the highest order and one which represents an approach to principle so low, it is bordering on
unethical negligence.
It would be interesting to have Dr, Simon Longstaff from the Ethics Centre make specific commentary on the treatment of the advisers position by Govt and about whether or not it is deemed ethical to
change a law affecting retrospectively agreed payments in the clear knowledge the effect of those changes would detrimentally damage those who have acted in good faith ?
Agent86 and many others here and other threads show far more intelligence and understanding of peoples needs. Its a shame politicians didnt have balls to be informed and make explanations as you have. All the positives seem to be out the window and Australians are going to be the biggest losers and hayne (lower caps on purpose) may well find his lack of glory in years to come when he is exposed for the damage he has caused Australians. Its put me into a position where it confronts my integrity and ethics of what i set out to achieve 30 years ago. sacking 1000 clinets and charging 100 clinets the same? to provide advice and survive is not going to work for me or ethical advisers. Its not just about articulating your value proposition and remaining commercial, its providing value and thats the issue! Client value will be gone and the average person will not get service and many claims will never be processed. If anyone challenges me on those points then they lack experience! and know FA. Its burnt me out and compromising my ethics and values has torn me to shreds and im just a former person of a once healthy guy.
Ten, very sadly you are only one of thousands of experienced and ethical advisers who have advised, serviced and assisted many clients over many years, who without their assistance would have floundered and now find themselves struggling with what has effectively been nearly a decade of consistent attack and a devaluing of their worth.
It has also been the most vitriolic pursuit of an industry over an extended period of time which has become an obsession.
In the end, there is only so much kicking and destruction of self worth and confidence that people can take.
The very sad and misguided thing is that we know and our clients know the value we deliver and the assistance (often on a pro-bono basis) we provide and yet we are subject to a constant and relentless political and media driven hate campaign.
It has become an unfortunate national sport.
Last night Josh Frydenburg in his budget speech referred to small business as the " engine room " of the Australian economy.
For Frydenburg to state this and then propose to dismantle the legally approved grandfathered payments in addition to the contemplation of the possibility of eradicating insurance commissions is effectively running the engine without oil and it will inevitably seize.
You will then have a broken engine that cannot be fixed.
Malcolm Turnbull referred to small business as the "backbone of the economy"....Josh Frydenburg , "the engine room"....
and yet they are destroying the very businesses and individuals that they claim to support.
The personal damage to advisers and the damage to consumer access and affordability will eventually take it's toll and be utterly counter productive.
thanks for your kind words and few seem to know what we are going through. You covered it well again. i received a call from the FPA today and they seem clueless. I articulated my position etc and they pretended that they hadnt come across this before etc.
I Shared about my need to retain CFP status but I wasnt willing to pay the fees for membership as I found none of the services productive for me and that they were not serving me in my best interests. i also explained i was the customer. I explained i would like to pay for only what I need. I think that's foreign to them? I explained that it was what you as the FPA feel is ok for us and now I want you, the FPA to lead by example. Ill set a fee of $50 as reasonable to retain my CFP certicate behind the bedroom door. I said I would be prepared to sign this fee disclosure statement for the next year. she said, thats not how it works.........oh dear......I said, it will now, please listen to your customer who pays your way.
Just closed our office and moved back into a home office after cost have risen to a concerning level. I wish the FPA, hayne and Josh F could have been their to see the despair on our faces as the furniture was wheeled out of our office of the last 10 years. I feel defeated, i feel embarrassed, i feel humiliated but i have to make the best of what i can as i have loan still outstanding from a risk book i bought 6 years ago.As a self employed planner i have been cast adrift by anyone and everyone making decisions. Employed planners are ok as the banks soak up the loses and they get paid their wage. Ted, i feel your pain and totally agree that the FPA have absolutely no idea what is happening in the life of a self employed planner and are ruderless in who they are trying to represent. For me it's a total vote of no confidence in the current leadership team at the FPA from my perspective, but my perspective counts for little with them , as was your case Ted. Good luck to everyone and best wishes.
So sad to hear this. Please try to stay strong and don't let this affect your mental health. It's a hard time for all of us.
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