Consumer group Choice has renewed its call for a total ban on grandfathered commissions.
In a submission filed with the Productivity Commission (PC) inquiry into Superannuation Competitiveness and Efficiency, the consumer group has spared nothing in arguing for an end to trailing commission including a clear-cut suggestion to the PC that it recommend “that the Federal Government introduce legislation to ban grandfathered commissions.
The Choice submission strongly backed the direction of the PC’s draft report, but said it needed to go further in key areas and led off by putting trailing commissions at the top of the list.
“We support greater disclosure; at minimum consumers deserve to know what they’re being charged for any service,” it said. “However, this really is a bare minimum. A far better outcome would be to ban trailing commissions altogether.”
The Choice submission then cited the need to urgently reform the Insurance in Superannuation Voluntary Code of Practice.
It said that Choice had sat on the working group for the Code and that it was “our experience that the industry stripped the Code of its enforceability and removed many of the protections designed to end the erosion of accounts, particularly for young people”.
“Our view is that at this point the industry is incapable of meaningful reform,” the Choice submission said. “We agree there should be a regulator-led taskforce to improve the Code, but stress that this should be done in consultation with consumer groups.”
“We also see a strong need to adopt the co-regulatory proposals in the ASIC Enforcement Review and thereby enhance the role of the regulator in code development, monitoring and enforcement.”
“Finally, we encourage the Productivity Commission to explore options to give consumers a greater voice in debates about the superannuation system. We need a strong voice for superannuation fund members. The superannuation industry covers 15 million Australians who collectively own $2.6 trillion in assets. We need an independent and well-funded body that represents the interests of superannuation members.”
Comments
If grandfathered commissions are banned, consumers will pay the same fees, but lose access to advice. How is that a good outcome?
Once again Choice is proving they have no idea about the financial sector. They should stick to what they are good at - ie. comparing vacuum cleaners and televisions.
That ought to shut them up Ben. I can hear them crawling back into their shell now.
Ben - given the sordid discoveries by the Royal Commission, it looks like vacuum cleaner and television sales staff have a better reputation and more honesty than many in the banking, finance and planning swamp.
Ah he's back the Choice employee. And the reputation of the neo-Marxists that you subscribe to is ........ what?
Solutions - The product issuer / licensee (Those that are being shown with the biggest issues in the RC) 'buy' the client back from me at the AMP 4x rate.
I can use that money to extinguish debt.
The client can pay reduced fees.
I can engage clients to pay for service if the client agrees.
The product provider / licensee wears the hit on this not me. And the fee structure of 'commission' products is frozen so they can't increase the fee to make up the cost on the client.
Seems the client will be in a better position, i'll be in a net position and the provider will be in a worse position. It's better than the anticipated outcome where the adviser is in a worse position and the provider is in a net position.
If you made a bad business decision to underservice/have too many clients acquired through debt, that isn't their fault.
If you service clients, they will pay you a fee without issue. Everyone else does it.
Yes that's true. It has been a bad decision that was advised / facilitated by a product provider / licensee. But the old adviser and licensee got their money. I guess that's fair because they always acted in their clients best interest and delivered all the service to those clients. They weren't in house products and had reviews every year.
It's just us younger advisers that are playing the game.
I suppose in reality I didn't start my business early enough to get enough organic growth in the glory days to be robust enough for all of my insurance commissions to be turned off.
PS i contact those 'trail' clients each year trying to get them in to review.
Typical comment from an organisation who has no idea what they are talking about. These people have never run a business, nor given advice to clients who appreciate the assistance and advice given and don't care how we are paid. If Choice wishes to compensate all adviser for loss of revenue if these were removed then fine. If not go back into comparing consumer goods which is why you were originally established. Far too many "experts" having a say in what has nothing to do with them.
Thanks Laurie, now that you have preached that to the converted what happens next?
Choice has moved from white goods to comment on how revenue is to be distributed?
While I don't like Choice having a say on topics that they really don't understand, I also can't understand how Advisers can still be defending trailing commissions. We need to move to an era of people paying an agreed fee for advice, either upfront or ongoing, no more in built commissions that the client doesn't see and doesn't know they're paying. If you've got a book full of legacy products paying trailing commissions why not use it as a reason to get out and see all of those people, change them to current products with lower fees and likely better returns, and show them the value of advice. You'll end up with a client base full of actual clients not just names of people who you haven't seen for years and you'll probably increase the revenue they generate for you rather than just 0.44% of whatever amount they have in their account.
I know there's a lot of Advisers that actively service and provide advice to commission paying clients but there's more that don't. There's literally thousands of clients being deliberately left in legacy products because the Adviser doesn't want to deal with having to send out an FDS once they start charging a fee. That's not good enough.
A 3 year transition to removal of trailing commissions seems sensible to me.
I would wager that the individuals supporting, promoting and running Choice would have a far greater understanding of how business, wealth and power works than anyone here.
I would 100% disagree with you. They started reviewing washing machines and dishwashing powder, now they can argue they understand the fineries of a Centrelink grandfathered TAP started in 2007 with an outrageous interest rate that is incomparable with anything in the market to date? I purchased a business (because I know what the bloody hell I’m doing, I’ve got degrees and experience to back it up) and this delightful client came as part of that asset. I’d love to move her into the new world of advice but unfortunately I can’t without losing her $17k a year in Age Pension. Maybe looking at the new Dyson Handheld might be more up their alley.
Ah yeah, where have you been for the last 10 years Anton? What are you doing to set them straight and defend the reputation of your own business? Hoping the FPA will ride in to save the day?
I wish people who should know better stop chastising Choice in that they "don't understand" or "they are clueless".
They know exactly what they are doing. They have won and they will keep on winning on behalf of those that use Socialist ideology to eliminate opposition of their own interests. i.e. control of vast sums of capital.
If you go back to every one of these types of articles over many years in this and other industry publications you see the same lame indignant comments by those whose livelihoods are on the line and it stops there. Endless virtue signalling and vocal outrage with a tiny little poke back that makes you feel better. Then you disappear for the cycle to be repeated in the next article. Bit by bit they chip away at you taking away your and your client's freedom of choice. Freedom for you to work on your own terms and freedom for your client to choose an option away from those herded into an institution of centralised control.
Got a solution there then sport? I’m the owner of a FFS business and don’t take kindly to a group that does not understand my business or my clients riding in and riding roughshod over a topic that’s above their pay-grade.
Im retired now, but thinking... "too bad for any adviser who like me , got straight off up front commissions OR fees when trail commissions became available; genuinely preferring an approach where clients and I were in effect renting the fund management rather than having to get it all right at the start. I got to where a trail of say 0.4% was replacing an up front commission OR FEE of ten times that , so taking over ten years without interest to get paid, and unavoidably committed to monitoring and fine tuning client portfolios or changing platforms or whatever was best, free of any hint of fee churning etc,. But it was the right thing to do. Invoicing every month for "two and sixpence" would be silly. Yes, I know that it seems most big insto advice groups just kept charging the up front commissions and added the trail. But not all are tarred with the same brush. Arrgghhhhh. Glad I'm out of it. Damned if you do or you don't. The big guys create the public story , the brush and the tar.
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