August 2, 2019
The Financial Planning Association of Australia (FPA) has raised its concern that consumers could be the ones to miss out as the Government’s Treasury Laws Amendment Bill 2019 is introduced in the Australian Parliament, ending the grandfathering of commissions on investment products.
Although the FPA states it supports the phasing-out of commissions on investment products as recommended by the Financial Services Royal Commission, it is concerned that the Bill has no additional details on how this will be done to ensure consumers benefit from the change.
“Removing commissions must result in a genuine reduction in product fees or the rebating of the commissions to consumers, and we haven’t seen details of how the Government expects this will work,” says FPA CEO, Dante De Gori CFP.
The Association noted that if a financial planner stops receiving commissions, this doesn’t mean the consumer stops paying them through their investment fees. The cost of the commission is embedded in the fees, which is why the rebating and monitoring arrangements are so important.
“We are disappointed the bill allows only 17 months to complete a change that the FPA has recommended could take up to three years…”
“We are disappointed the bill allows only 17 months to complete a change that the FPA has recommended could take up to three years if the Government is to avoid unintended consequences for consumers, and the financial services ecosystem,” said De Gori.
“More than fifty percent of FPA members have already made the transition and derive no revenue from commissions on investment and superannuation products. So it’s not about whether our members are willing, they are, it’s about making sure the transition is done carefully and diligently to protect the interests of everyone, especially consumers,” he added.
The FPA urges the Government to provide a full three-year transition period and release further details of the proposed rebating and monitoring scheme so they can be examined by the industry.