The Association of Financial Advisers has delivered a damning critique following the final passage of legislation earlier this week that will ban grandfathered conflicted remuneration.
While acknowledging there will be some consumer perception positives that will stem from the ban on grandfathered conflicted remuneration – set to take effect from 1 January 2021 – the Association’s main position is summed up in a statement to its members, which reads in part:
“To say that we are disappointed in the process, or more lack of due process, on this issue is an understatement”
In its message, CEO, Phil Kewin, said this outcome “…will be devastating for some advisers, particularly [for] those, who in good faith borrowed money to kick start or grow their client base, and now will not have time to review their clients whilst trying to maintain an income to repay a loan on an asset that now has no value.”
Kewin also noted that what he referred to as a fairly simplified narrative that is merely stopping payments to advisers who aren’t servicing their clients, stemmed from the Banking Royal Commission recommendation 2.4, and has been influenced by ASIC in its quest to remove all conflicted remuneration:
There were no complaints tabled during the Royal Commission hearings where clients were disadvantaged by Grandfathered commissions
“There were no complaints tabled during the Royal Commission hearings where clients were disadvantaged by Grandfathered commissions and certainly no hearings that focussed on any advice related issues. There certainly was no assessment of the size of the issue, the client implications or the broader impact of removing grandfathering,” said Kewin in his message.
He added there were many flaws in the process that culminated in the banning of grandfathered investment and superannuation commissions, which he said included no client complaints, no Regulatory Impact Statement and no informed debate on the consequences of a blanket ban in a very short timeframe.
Advisers can click here to read the detailed statement released by the AFA following confirmation of the ban on grandfathered investment and superannuation commissions.