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.
“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:
- Continuing to allow grandfathered commissions is not in members’ best interests.
- Commissioner Hayne’s concerns would not be addressed.
- The rebate of commissions approach is subjective and could not be properly monitored by the regulators.
- 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”.