Efforts by Australia’s banks to end grandfathered payments and trail commission for financial advisers will not include life insurance commissions.
The representative body for the banks, the Australian Banking Association (ABA) announced it would seek legislative changes to the Future of Financial Advice (FoFA) reforms to remove provisions that allowed grandfathered payments and trail commissions in financial advice.
However, Riskinfo has confirmed with the ABA that these changes would not extend to life insurance commissions.
In response to questions regarding the extent of the changes, the ABA stated they would not include life insurance commissions which were a matter for the Financial Services Council.
ABA Chief Executive, Anna Bligh said the removal of the grandfathering provisions in the FoFA legislation was “…another important piece in the puzzle of ensuring there are no conflicts for advisers”.
The ABA proposed the legislative change alongside an announcement it would change the Banking Code of Practice to end the charging of ‘fees for no service’ by “…proactively contacting customers to confirm what advice is required and only charging for what is provided”.
Both announcements were made in response to issues raised in the Interim Report of the Financial Services Royal Commission and Bligh said, “It has always been unacceptable for any organisation to charge fees without providing a service”.
“This announcement will put beyond the shadow of a doubt that this practice has no place in Australia’s banking industry,” she added.
“another important piece in the puzzle of ensuring there are no conflicts for advisers”
There will never be “no conflicts” unless advisers provide services for no charge. Every form of remuneration is conflicted, including fee for service. Conflicts exist in all professional services, including doctors, lawyers, and accountants.
Some of the worst financial advice being provided at the moment involves the excessive use of overly complicated, unnecessary SMSFs. The providers of this advice get large fee for service payments as a result. Are there any commissions? No. Is the client better off compared to readily available alternatives? No. Is this conflicted remuneration? Yes!
An important fee that is now retained by the banks Super funds and Insurance companies! How on earth do they establish that these clients were not being regularly serviced and looked after. I have clients 30 years with me I see all the time ? Lets see what service they provide on an ongoing basis from the companies now. I cannot keep seeing them for free and to ask for a fee just wont happen. Just another way to get rid off legacy policies when the clients need the service and advice most Disgraceful.
Blights comments should centre around the conflicted banks she works for, that is where the corruption has been.
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