The Royal Commission should not go unchallenged – AFA

The Association of Financial Advisers (AFA) has directly questioned why many of the findings of the Royal Commission have been left to go unchallenged and is arguing that the Government risks being found guilty of over-reach by implementing the Commissioner’s recommendations without question.

In a message to AFA members, the organisation’s general manager, policy and professionalism, Phil Anderson used the six-month anniversary of the release of the Royal Commission’s findings to argue that financial advisers had been unfairly targeted and to question why the Government was driving “fundamental change at break-neck speed just because one person says so”.

In doing so, Anderson suggested the Government might actually be seeking to circumvent the law by encouraging large companies to breach their contracts with small businesses.

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Further, Anderson argued that the Royal Commissioner, Kenneth Hayne veered from his terms of reference by not having regard to the implications of any changes to laws that he proposed, the economic outcome or the affordability and accessibility of financial advice.

“There was little discussion about the implications of the financial advice recommendations. There was no discussion on the number of clients impacted, or the impact on the adviser population. There was no reference to the impact on accessibility or the cost of financial advice. 

“The implementation of these recommendations will put access to affordable advice at increasing risk for everyday Australians. This was demonstrated by a recent statement from the MLC advice business, that they, ‘will focus on affluent clients, not mass clients’,” Anderson wrote.

The AFA executive said the bottom line of having left the Royal Commission’s findings unchallenged was that big decisions had been made by Government, and more recently by large institutions, but that the impact had been felt greatest by thousands of self-employed advisers and the staff working in advice practices.

“The regulators have issued directives that will impact the ability for small business financial advice practices to charge ongoing fees from superannuation accounts,” he said. 

“The Government has moved to ban trail commissions in 16 months’ time. Groups like AMP have committed to removing it in less than half that time. This impacts clients who are exposed to the loss of access to advice in this short timeframe. The impact is hardest felt by those advisers who have recently bought businesses with trail commission clients, typically with borrowed funds. It will also have a big impact in regional and remote areas.

“Many advisers around the country are at the moment subject to horrendous stress. For the big institutions, offloading advice operations is just a matter of a rounding error. For some advisers it will mean losing their lifetime savings.”




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This is great coming from a body that didn’t know what a professional body did, didn’t have any interest in supervising professional performance of members and seemed to be captured by big money of product providers.

...where was this outrage in February? Just a little late.. these despicable companies have well and truly started the process of screwing small businesses!!

Kenneth Hayne had a personal, ideological agenda to achieve.
The solicitors involved had scalps to collect and their own reputations to advance.
What better way to do this than to be on camera every night in front of the public with the cross examination of an individual.
The current Govt were in damage control and self preservation mode because they believed they would most likely lose the election and Labor definitely thought they had the win sealed.
The current Govt would have agreed to and implemented anything in order to preserve their political position.
If they had come out after the RC and said " we need time to really consider these recommendations and the long term effects for consumers and the advice industry", the left wing media would have attacked them like a pack of wolves.
At that point right then, the Govt would never have risked losing more ground to Labor than they initially thought they already had.
Josh Frydenberg was never going to challenge the so called evidence or the impact because it would not have been politically smart to do so and his minders and advisers would have been instructing him accordingly.
Josh Frydenberg was and is of course on the road to leadership aspirations and these things just cannot get in the way of the ultimate prize.
Ridiculously, Bill Shorten came straight out before Kenneth Hayne had delivered his recommendations and stated that a Labor Govt would implement every single one of his recommendations, even BEFORE they had been released.
How can you agree to something that you have not yet seen or considered ?
This illustrates that the responses from both sides of Govt in relation to the RC recommendations have not been based on complete and thorough analysis, but on political perception and survival in power.
If Labor want to win the next election, then Bill Shorten should be reiterating the legal advice he received in 2011 from the Australian Govt Solicitor which quite obviously recommended that he could not include the banning of grandfathered commissions in FOFA as adviser's contractual rights to receive that remuneration would be breached and the Govt would be in a world of pain regarding the changing of the law and acquisition of property.
So, Bill Shorten accepted the legal advice and proceeded to quarantine grandfathered commissions from the FOFA legislative changes.
Josh Frydenberg's strategy is to have the product providers tear up the adviser's existing contractual rights rather than the Govt and therefore attempt to avoid the Commonwealth breaching Constitutional terms and avoid any payment of fair compensation for the forced acquisition and loss sufferred.
The Govt are hand balling the liability and avoiding their responsibility.
They want someone else to do their dirty work and they have handed it to the very organisations who were subject to the adverse findings from the RC.
It is sneaky, underhanded, deceptive and entirely wrong.
In the meantime, the current Govt are approving ASIC's transition of tens of millions of dollars from corporate compensation and fines to bodies and entities that consistently and strategically attack the independent financial advice industry and largely support the vertical integration model of the Industry Super Funds.
This process has destroyed trust in a fair and balanced playing field.
It has also destroyed the self esteem, self confidence and self worth of many , quality financial advisers who are simply exhausted and tired of the constant and relentless retribution against them.
So many of these people are highly ethical and committed small business people who serve their clients with utmost consistency and dedication.
There is a very ugly and dark side to this current Govt, one of which smacks of discrimination and a manipulation of power and control.
Whilst Scott Morrison ( Man of Titanium ) struts the world stage, small businesses in his own country are being destroyed.
But, in the end, this is not important to the business of Govt.
It appears to be an annoying distraction that just needs to be " fixed " and to get it off the agenda as quickly as possible.
With advisers having to complete courses on ethics in order to prove they are worthy of continuing to serve their clients, it is the irony of the Govt's behaviour that places a very large shadow over their own.

Well articulated and I entirely agree.

Senator Tim Wilson was actively defending the rights of retirees from the franking credit fiasco, and to a large degree was to thank for the election win with his non-stop agenda around Australia garnering senior citizen support and harnessing their outrage into a voice that the media finally listened to.

Where has been his reward?

From what he has to publicly say, he is very aware of the bias against planners and the insidious influence of industry funds and unions and Labor being bankrolled out of member benefits. It appears ScoMoped (aka Scooter from the muppets) or perhaps Josh Hyndeberg have effectively muzzled him?

Well said!! You have captured all that is wrong with the financial advice environment today - you just left our the FARCEA joke (but we won't hold that against you), The Liberal govt for their part have been very disappointing in all of this. Self-preservation?

And the legacy that history bvb will show for Scott Morrison, two records 1) no Treasure and 2) no prime minister - has moved more money to Industry Super than he has. Well done Scott Morrison.......

The retail funds and their mates caused this run on money all by themselves with their criminal acts, rip-offs of customers, excessive fees, and poor performance. Dont blame Morrision - remember he and his mate Josh deliberately blocked any Royal Commission at least 26 times. They cared for clients of the superannuation industry as much as the funds caught wanting by the Royal Commission.
Hopefully now the retail funds will perform better, have more reasonable fees (ie lower) and perform with due attention to good corporate and personal behaviours (I declare an interest).
Hopefully you will no longer turn a blind eye to the shenanigans of the for-profit funds and their mates.
BTW The Future Fund (chaired by Peter Costello) has return 11% and may be it would be best if there was a single superannuation fund for all Australians.

What are you advocating Hedware, a Socialist or perhaps Communist society ?
Where all the peoples superannuation monies are controlled by the singular source ?
I am assuming that all monies from every industry fund would be automatically transferred also ?
Imagine the fight from the unions then, when they no longer received their annual tens of millions from the redirection of industry fund's Directors fees ?
One for all and all for one ??

I am sure that Peter Costello would be amused by you calling him a socialist or a communist. Anyway the Future Fund is administered by public servants and they cant be socialists or communists because the Fund they administer outperforms the funds of their capitalist counterparts.
I have no issue with your subsequent points so long as it applied to for-profit funds as well and I am aware of their contributions to the 'other side'. I have to take your word re contributions to unions by industry funds as I am not deep into industry funds as you appear to be.

You only ever vilify retail funds and never industry super, why?

Here are two reasonably contemporaneous snippets from mainstream articles:
AFR artcile 12/7/18
A former executive at Australian-Super has accused top officials at the country’s largest superannuation fund of pressuring him to funnel investment into a union-linked property trust despite conflicts of interest … (Jack) McGougan claims he was forced out of his $500,000-a-year job for opposing moves by chief investment officer Mark Delaney and director Brian Daley to invest in industry-fund controlled developer ISPT … When he raised concerns over the fund’s poor management of conflicts of interest in relation to ISPT, AustralianSuper chief executive Ian Silk told him “you have to drop this” … ISPT is an unlisted property fund and developer set up in 1994 by former ACTU assistant secretary Garry Weaven and co-founded by AustralianSuper.

AFR article 29/5/18
ISH has long been surrounded by controversy and is a blight on the record of its largest shareholder, the mammoth, ACTU-run fund AustralianSuper.
Take, for example, the ISH-owned Industry Fund Management's (IFM) failed investment in Pacific Hydro, which allegedly lost consumers $700 million in one transaction.
A detailed report on the failure allegedly was buried

Any defence for industry super specifically around these issues? (Note I asked for a defensive statement for their actions, not yet another boringly predictable aggressive statement about 'how bad retail funds are blah blah blah')

You can add to that list how a major Union Super Infrastructure manager stitched up Hastings Infrastructure Fund, by pressurising a major fund manager to vote them out. But if the fund manager didn't go along with their little deal, that manager was to be threatened with a permanent mandate exclusion. These Union Super funds need to be shut down. They are shockers.

Great to see AFA come out like this. They are truly differentiating themselves from the deferential FPA who acquiesce to their bank masters and the government.

I agree that the Royal Commission recommendations should be challenged, as those recommendations fail to follow the required ethical position for resolving conflicts of interest and the structural issues underlying the misconduct identified.

Conflict of interest can only be resolved by removing vertical integration. Intent and outcome in regards to conflicts of interest differ so vastly that it just does not make sense. Retaining vertical integration validates conflicts of interest as being acceptable, yet the commission was continually at pains to have such conficts identified and removed.

Structurally, the AFSL format is an absolute conflict of interest, and allows gatekeepers and rent-seekers to both introduce conflicts of interest as well as reduce adviser effectiveness and ability to respond to - and more directly follow - legal requirements.

IF the intent is to make financial planning a profession then requiring an AFSL is the equivalent of requiring Doctors to be licences through drug companies or Accountants to licence through MYOB. It makes no sense and is completely at odds with the underlying intent.

Strangely, this same failure of ethical clarity was repeated by FASEA in setting Standards. FASEA requires advisers to step aside when there is a conflict of interest, yet somehow does not see vertical integration as a conflict.

The Royal Commission highlighted massive and structural misconduct, yet its recommendations specifically allowed structural causes of conflict to continue. For this reasson alone, the recommendations should be treated with caution.

The wisdom of the crowds however, has descended into a tyranny of the masses, allowing grandstanding and sweeping change completely devoid of underlying evidence-based logic. Debate descends into a spiral of one fallacy after another.

As an adviser, all of this simply has to be accepted. However, I must admit to finding it disappointing that after voiding legal contracts, avoiding compensation, and forcing the failure of many small businesses, emotional turmoil and even suicides, the government implementation of the Royal Commission recommendations will still leave Australians with a structurally conflicted financial planning sector.

Good points

Michael I sincerely hope you are not advocating for the end of AFSL’s, it is an integral part of the advice delivery framework. We have an AFSL and embrace the responsibility without fear or favour, I’m sure you’ve met plenty of advisers in the marketplace who simply would not have the capacity to consider formulating their own APL, negotiate PI cover, maintain the mandatory ASIC registers and reporting at the same time as running a business. Doctors are not governed by the same standards we are and accountants have a limited liability scheme they are privy to. If you want to abolish the AFSL, you leave every planner at the whim of the government of the day to legislate what products can be manufactured and distributed. That ought to be a function left to small business.

Limited Liability Scheme is end game. No need for AFSL's once in place with the Code Monitoring Body. AFSL's will cease to exist in current form. Bolt on added value services such as those you have mentioned.

There is no point the AFA shedding a few tears for us then just sitting back on their adviser funded salaried back-sides and doing nothing. When are they going to step-up with a full blown relentless lobbying campaign to the Government and the public about the negative impacts on the industry and the public! The AFA and the FPA are just money sucking wastes of time. Soon there will be few advisers left in the industry to pay fees to associations because they haven't done anything to save advisers!

As a self employed planner i am just pawn in a bigger game waiting to taken by the king.
AS fast as i learn it becomes redundant and require further knowledge.
As fast as i upgrade my models and processes they are obsolete.
AS hard as i try it will never be enough to beat the almighty power of the political party donors and factions at play to keep politicans in power that are sympathetic to their cause and a source of future employment..
It's a big club and you ain't in it....https://www.youtube.com/watch?v=i5dBZDSSky0

The ultimate solution is to reverse the Opt-In to Opt-Out. Until then, the Union Super funds will have a field day. But their day in the sun may fast be coming to an end, once Intra-Fund is extended across other product providers. Not long now... Then its on like Flynn. But in reality, FOFA is a joke, & should be scrapped. It only favours top end advisers, who charge $10,000 pa for over-servicing their small coterie of clientele. It's akin to selling boutique ice-cream, compared to high volume ice-cream retailing. And as a result, the average bloke on the street will now struggle to get advice at all.

Loving the victim mentality in all this. Keep howling at the moon boys while the legislative and court of public opinion meteor hurtles towards you

......."court of public opinion" ????
Really Joker?
Where are all the members of the public shouting out they no longer trust advisers ?
From all the data, it appears that most of those who do have an adviser value and respect the advice provided and achieve more from having an adviser than those who do not.
So, maybe the court of public opinion is simply a whole lot of white noise from people who have never sought or received advice and most likely never will.
It's the same as people who constantly whinge about politicians but then abstain from voting as some form of bizarre stand against the system.

While I appreciate your opinion varies from that of advisers impacted by these changes, it might be helpful to consider the causes underlying what is undoubtedly a "victim mentality": (1) Legally valid contracts of income are being cancelled with no compensation (2) Statutory regulators are facilitating this through product providers, leaving no recourse to standard community legal recourse (3) No evidence has been produced to confirm the impact of cancelling grandfathered commissions - neither impact on advisers nor more importantly, on clients (4) No valid "disruptor" or replacement for the adviser service exists or has been proposed (5) Advisers who made business decisions based on the original FOFA legislation will lose money - this is double jeopardy of a highly peculiar nature (6) the misconduct identified by the Royal Commission was primarily (almost solely) that of institutions taking adviser commissions or dealing with what were otherwise supposed to be adviser commissions, inappropriately (7) advisers are paying - through lost business value - for the misconduct of institutions and institutional managers, who did not understand their obligations or ethical positions (8) The conflicts of interest identified by the Royal Commission have not been addressed by the Royal Commission. Grandfathered commissions are simply seen as the easiest "win" available (9) Advisers are committing suicide or falling into horrific levels of depression through being deprived of their livelihood after decades of effort (10) Advisers are generally arrogant but knowledgeable lot, who would be measured as "socialist capitalist" through nature. These advisers are struggling as much with questions of injustice and regulatory preference as they are with business issues.

These are the immediate responses I could identify and provide specific examples of. There may be elements of victim mentality existent in adviser responses, but that does not mean that there is no underlying reasoning behind that reaction.

Very well said and explained Michael.

Joker is a pretty apt handle. If you had a wife, which is exceptionally unlikely, she'd probably think your minuscule bedroom attributes were laughable... :) :) :) :) :)

Obviously matches perfectly your level of intellect and empathy towards others (hence the pretty sure bet you ain't got no-one little fella).

At the very recent Risk Advice Summit in Sydney, it has been reported that ASIC's Joanna Bird stated that the 2012 review of Life Insurance will be " much bigger " than the 2014 ASIC Report 413.
She also commented that the ASIC Report 413 would be used as a benchmark.
ASIC Report 413 was a manipulated and strategically manufactured process ultimately designed to drive an obsessive and unhealthy focus on Life Insurance commissions.
ASIC had an agenda and they constructed a method by which to kick off their pursuit of eradicating commissions.
When the outcome of the Life Insurance Framework was finally and woefully determined, ASIC's determination to continue pursuing this agenda was galvanised because they had not achieved their intended outcome.
Their pursuit had been interrupted and the time frame extended.
It is now very clear they have a determination to gather as much data as possible in order to create an argument that the quality of advice received by consumers is directly related to the type of remuneration received.
The attempt to continuously relate these 2 factors is flawed.
A consumer may receive excellent, compliant advice and the adviser may have previously received 100% commission payment built into the product pricing and yet another could receive non compliant and very poor advice for a fee, a significantly reduced commission payment or in fact no fee at all.
If the sole focus of ASIC is to ensure that consumers are receiving a high quality of advice, then the basis of remuneration, whether it be a choice to the consumer of fee for service , commission or a combination of both should not be the determining factor as long as the consumer is made clearly aware of the basis of remuneration and agrees which ever model is elected is suitable to them.
Unfortunately, there will be an incredible level of vitriolic and uneducated commentary and pressure from all corners attempting to sway the outcome based on ideology rather than reality and ground level knowledge and understanding.
If ASIC are so determined to ensure the protection of consumers regarding their access to high quality risk insurance advice then they also need to carefully consider the significant impact of a destruction of the Life Insurance advice space and the inability of consumers to access important risk insurance advice, strategy and assistance at claim time from experienced, educated advisers who no longer exist.
Kenneth Haynes statements regarding the proposed reduction of commissions to zero takes into account none of the factors that would benefit the consumer and ensure a healthy and sustained Life Insurance advice business for the future.
The notion that removing commissions from Life Insurance products will result in enhanced consumer outcomes is unproven and based entirely on supposition.
Paying less for something does not ensure the quality of what is received.
Paying too much is also foolish.
However, the consumer deserves a choice of how they will pay for advice and product and advisers deserve the right to elect the method by which they are remunerated for their advice.
Removing choice removes flexibility and is not in the spirit of a free market economy.

CORRECTION : 2021 review of Life Insurance... NOT 2012...typo.

The court of the public is quickly discovering the previous level of adviser service support is quickly evaporating, so that opinion may be turning around in the not too distant future, when they come to realise that the Union Super funds have ultimately been responsible for making it harder to access financial advice.

They are known as industry funds with coverage of particular industries and have EMPLOYER and employee representatives running the funds. Sorry about the caps but the employer representatives are always overlooked.

Where is the evidence for these funds actually stopping people engaging independent financial advisors? Anyone can go to one, two or many financial advisors if they wish.

Maybe your view is that industry funds are offering advice in competition to financial planners. Then it is up to the financial planning industry and its members to show the value of independent professional advice. With the current inflow of superannuation contributions into industry funds in the wake of the Royal Commission does show the punters are voting with their money.

Time to stop this whinging and to take action to do better and change perception of superannuated.

Remember the old Adam West 'Batman' show? You should get a theme song Heddie, Or perhaps an introduction voice over like the Roger Ramjet cartoon for your own little flurry to always jump to union fund's justification, something like "Fearless Defender of Industry Funds, Union Zealot, and Blindly going where no sane intelligent well researched financial professional would dare to go..." Ah no, my mistake probably the closest is DICK Tracy.

Heddie is probably earning $100k a year as a tied intra-fund agent for the Union Super funds, collecting a salary, bonuses plus a gym membership for doing precious little - for doing very little except turning up for the day.

Pleased to see that you can now read comic books. Keep up with the good work.

Oh Ba-Zinga, what a scorching, intellectually challenging comeback... yawn.

That piffle is about as well thought out as the obvious effort you go to when researching products, Richard.

More good work with the comic books. Keep up with your reading.

I think hedware has a phd in mathematics. he is a billionaire but gets bored earning a lot of money each day as he is tired of counting his piles and piles that's why he comes on this forum to talk to us little people

but if you were a hedge fund billionaire or had a phd in mathematics why come on this forum. unless your name is tim m and you are pretending

It certainly would be interesting to know exactly what education/qualifications Hedware has. From Hedware's many post, I can't see much knowledge on Investing or Financial Planning - but I could be wrong????

from his posts very little. but boasts as if he has a masters in financial planning.

Yes, Hedware does fire off with the undisputed knowledge of layperson. Trouble is, although ignorance is a very comfortable place for one to exist without being challenged, it limits ones ability to gather new or accurate information and encourages entrenched ideas based on unfounded ideas of the unskilled and uneducated.

Hedware, you seem to have fallen behind the current policies post RC. Personal Advice is NOT about funds flow. Funds flow is for product manufacturers and your right that Industry Funds a very good a flogging their product - AND you even get a free set of Qantas point with some. As for the retail world, the retail products are getting away from advice as the silly advisers are not real good at selling the dealer groups preferred product and even if they do, very little ends up in their underlying investments. Far better for retail to follow the best product vloggers out there and simply employ telephone staff that can SELL SELL SELL the product (intra Fund advice mate) - can pay them less, pay them bonuses for more sales and sick them if they don't. No best interest and no conflicts we are told - and all paid for out of the Admin Fee charged to all - but no obligation to service or advise so no "fee for no service" issues. Keep up.

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