The Australian Securities and Investments Commission's (ASIC's) newly released guidance on conflicted remuneration goes to tortuous lengths to restrict remuneration of employees who sell their employer's financial products to retail investors.
This is the view taken by Tria Investment Partners managing director Andrew Baker, who used a blog post to communicate his concerns about ASIC's approach.
"These measures, while well intended, are exceptional in a world where real estate and stockbroker commissions survive, and where payments from consumer goods manufacturers to supermarkets for physical shelf-space remain commonplace," Baker said.
"You can receive a salary, but you can't receive a bonus based primarily on sales success," he added. "How you are supposed to pursue a career in selling financial products — should that be your ambition — is unclear; indeed this career path appears to be effectively banned."
Baker also pointed to the tightening of the rules with respect to rebates flowing from fund managers to platform operators, saying the only way for platforms to respond is to vertically integrate.
Baker said the concept of bargaining power had disappeared and was replaced by exemptions on "fees for services" from the platform to fund manager.
The fee-for-service exemption covers platform activities such as listing, monitoring and reporting.
"It's clear ASIC is expecting this fee to be largely fixed in nature or to vary with the number of funds, rather than growing with assets under management (AUM)," Baker said.
"Profit margins may get trapped at different parts of the value chain, but if you own the whole value chain, you don't really care," he added. "Just as FOFA encouraged vertical integration of advice, RG246 may encourage further vertical integration of asset management."
