August 22, 2019
ASIC has announced it will investigate how the industry is progressing in the transition away from grandfathered commissions for advisers.
The investigation, directed by the Treasurer following the Government’s commitment to a 1 January 2021 end-date, will review the steps taken by industry participants from 1 July 2019 until the 2021 deadline to end the practice.
The Government introduced legislation on 1 August 2019 to ban grandfathered commissions paid to financial advisers (see: Government Confirms Grandfathering Ban Date…), and the industry was quick to voice its concerns on the announcement (see: Deep Concerns Over Removal of Grandfathered Commissions… and FPA Warning on Grandfathered Commission Ban…)
ASIC stated it will investigate any impediments to the transition and the extent to which benefits are being passed on to affected clients.
It will conduct both quantitative and qualitative reviews. The quantitative study will involve a survey of entities known to pay grandfathered conflicted remuneration to Australian financial services (AFS) licensees or their representatives and require them under notice to provide data:
- Initially for a 12-month period (from 1 July 2018 to 30 June 2019); and
- Thereafter on a quarterly basis for the review period (for example, reporting for the period from 1 July to 30 September 2019 will be in October 2019)
The first notice to entities will be issued on the 21 August and they will be required to provide their responses via a web portal.
The qualitative review will include a smaller sample of entities that pay and receive grandfathered remuneration. This will involve more detailed engagement and analysis during the review period.
ASIC stated it will analyse the information from both reviews and report to the Treasurer by 30 June 2021 and the report will be released publicly.
The regulator expects to provide an update on its investigation to the Treasurer and industry as appropriate during the review period.