Industry funds reject grandfathering rebates

Industry funds group the Australian Institute of Superannuation Trustees (AIST) has flatly rejected the Government’s proposals to allow the payment of grandfathered commissions and other conflicted adviser remuneration via rebate schemes.

While the Financial Planning Association (FPA) has backed such a move, the AIST has used a submission to Treasury’s Financial Services Reform Implementation Taskforce to urge “a complete ban on the payment of conflicted remuneration, whether that conflicted remuneration can be attributed to a particular client or paid to a client group”.

The AIST said such a ban should come into place as soon as possible, recommending that it start in 2020.

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“No evidence has been given as to why continuing grandfathered commissions in any form is of benefit to members,” it said.

It said this was the only way to ensure that members’ best interests were met and that advisers were not tempted to game the system through an ill-defined and difficult to monitor rebate system.

The AIST submission said that there were four main reasons the organisation was rejecting the Government’s proposed approach:

  1. Continuing to allow grandfathered commissions is not in members’ best interests.
  2. Commissioner Hayne’s concerns would not be addressed.
  3. The rebate of commissions approach is subjective and could not be properly monitored by the regulators.
  4. Meeting the best business interests of advisers should not be a determining factor.

The AIST submission argued that the rebate approach to grandfathered commissions was subjective and could not be properly monitored and that while allowing product issuers to establish rebate schemes “cures the mischief that consumers are out of pocket and receive no services in return” … “it entrenches the incentive for advisers to recommend that clients stay in existing, often poor performing and expensive, products”.

 




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Given one major industry Fund has a large group of inhouse salaried financial advisers (who don't have to comply with bi-annual fee opt ins or FDS), their advisers should rebate their salaries to all of the other members who haven't received financial advice as well.

From an organisation that supports 1) the deduction of insurance fees from super funds, where the client hasn't agreed to buy the insurance product; 2) the deduction of fees covering financial advice, where the member hasn't even engaged a financial adviser; and 3) the deduction of fees covering lavish corporate sporting sponsorships and poorly disguised political activities which favour the interests of unions and super fund directors. Yet they are against having commissions rebated back to members? I really wish the mainstream media would call out this nonsense. These people are so deluded, they wouldn't know a moral compass if one was at the bottom of a cocktail glass they are sipping, filled with their own bathwater.

The real question is why is Treasury so ill informed? Huge concern.

Industry funds must divest themselves of their linked advisory groups.
This is a conflict that must be addressed immediately.
Let's hear the FPA get on to this and tie this any conflicts of remuneration and advice.

The comments do not address the issue of why grandfathered commissions should continue any longer. Just because one party does something do not give the other party the ok to do another thing.

The insurance deduction business is an issue in its own right and should address despite the likely push back from insurers.

It is facile to say that industry funds are the only ones doing lobbying to political, media and business interests. To suggest otherwise shows a lack of understanding what happens in the real world.

In that case an immediate ban on Intra-Fund advice fees that are charged to every single member of every Industry Super fund must be banned effective immediately and all fees charged to existing members since inception of their membership date who have have not accessed any Intra Fund advice during their membership must be refunded in full with interest and credited to their member account.
The Intra-Fund advice fees that are charged to Industry Fund members who do not access this type of so called advice, is a fee for no service and every member pays to subsidise those members who do contact their fund.
If an Industry Fund member accesses Intra Fund advice every week of the year, they pay the same cost as a member that has never accessed any contact with their fund over 25 years.
Could the AIST please publicly explain why this model is in their members best interest,why this is not a conflict of interest to some members as opposed to others and why this practice is acceptable at a Trustee level who are obliged to be acting in their members best interest ?????????
In the vast majority of instances, advisers do provide ongoing advice and services be it personal or general in nature to their existing clients whose accounts are subject to grandfathered commission payments.
The payment of grandfathered commissions are a legal contractual agreement and the reason why Bill Shorten in his media release on 29/08/2011, after receiving specific legal advice from the Australian Government Solicitor, stated that "the Government has determined that the ban on conflicted remuneration (including the ban on commissions) will not apply to existing contractual rights of an adviser to receive ongoing product commissions.
This means that, in relation to trail commissions on individual products or accounts, any existing contract where the adviser has a right to receive a trail commission will continue after 1 July , 2012, or in the case of certain risk insurance policies in superannuation, 1 July, 2013".
The then Australian Government Solicitor provided advice to Bill Shorten which concluded that the removal or banning of grandfathered commissions would result in a Constitutional problem resulting from the forced removal of existing contractual rights to receive ongoing payments and therefore the legal property of the adviser.
The Government did not wish to have to compensate the deprived parties based on fair and just terms relating to the the acquisition of property stemming from the Australian Government Solicitor's advice and subsequently recommended the banning of existing commission payments be quarantined from the FOFA legislation.
The ASIT claiming that commisions " cures the mischief that consumers are out pocket and receive no services in return" is laughable and utterly self-serving when consideration is applied to the rort that defines the Intra Fund advice fees charged to every single member of Industry Funds who are never provided with any service or advice because they choose not to access it.

Well said Agent 86.

Wait until they find out the compare the pair number are based not comparing the same asset allocations and cherry picked investments to make the industry funds look better! We all know they are not so great when you look at the asset allocation.

Amazing when you start seeing all the fee's and charges now which they didn't have to disclose until recently.

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