Volume rebate arrangements contractually existing before 30 June, 2012 will continue to exist under the Government’s Future of Financial Advice (FOFA) changes, under an agreement with the Government brokered by the Financial Services Council (FSC).
FSC chief executive John Brogden (pictured) confirmed the arrangement to Money Management, saying his organisation believed it had extracted an agreement that pre-existing volume rebate arrangements would be grandfathered.
As well, while the statement issued by the Assistant Treasure, Bill Shorten, referred to any and all volume-related bonuses, it is understood this does not extend to arrangements between fund managers and platforms – something that will ensure the continued existence of the pooled investment model.
Commenting on the Government’s FOFA announcement, Brogden said he believed that it was broadly a fairer package than that which had been originally outlined by the previous Minister for Financial Services, Chris Bowen.
However, Brogden expressed concern at the decision to ban commissions with respect to all risk insurance within superannuation, describing the decision as “nonsensical” and likely to widen Australia’s continuing underinsurance problem.
“If the Government has set out to achieve two objectives – higher quality financial advice, and more accessible financial advice – then it has achieved just one of those outcomes because advice will undoubtedly become more expensive,” he said.
The FOFA changes received a mixed reception throughout the financial services industry this morning, with both AMP Financial Services and MLC and NAB Wealth welcoming some elements but warning about the fallout from the ban on risk commissions within superannuation.
MLC and NAB Wealth group executive Steve Tucker also called for an appropriate transition period for the removal of volume rebates to give financial advisers and product providers adequate time to adjust “to what will be a significant shift”.
The Association of Financial Advisers (AFA) claimed the FOFA package was indicative of the debate having been hijacked by the industry superannuation funds.
Commenting on the package, AFA chief executive Richard Klipin said the Government’s intention to ban commissions on risk products within superannuation meant consumers would have to fund the cost of advice upfront, out of their own pockets.
“While it might be a victory for large superannuation funds and the superannuation lobby cheer squad, it is a dark day indeed for ordinary Australians and their ability to access affordable advice,” he said.
