An ASIC report into the industry’s transition away from grandfathered conflicted remuneration found that financial advisers have changed the way they charge clients.
The commission says in its report, which covered an 18 month period to 31 December 2020, that where appropriate advisers moved clients to other fee arrangements – “…for example, charging an ongoing fee, an hourly rate, a fixed price or an asset-based fee”.
ASIC’s report Ending Grandfathered Conflicted Remuneration investigated the steps taken by industry participants to:
- End the payment of grandfathered conflicted remuneration (GCR) ahead of the commencement of the legal requirement to end GCR
- Pass previously grandfathered benefits on to product holders
Its executive summary noted: “Overall, the findings of our investigation were very pleasing. Nearly all product issuers ended GCR arrangements before 1 January 2021.”
It also states a small number of product issuers have arrangements in place that require them to rebate previously grandfathered benefits from 1 January 2021. These product issuers plan to rebate product holders an amount equal in value to the amount of GCR the issuer would have otherwise paid.
ASIC’s summary shows other key findings from its investigation included:
- Before the review period (the 2018-19 financial year), 93 product issuers paid $816.1 million in GCR relating to 1,323 products and at least 2.5 million client accounts
- During the review period, 89 product issuers paid $760.5 million in GCR relating to 1,273 products. This amount is reflective of the fact that most arrangements were only terminated towards the end of the review period
- During the review period, product issuers fully terminated 96 percent of GCR arrangements (1,227 products). Product issuers did not fully terminate 4 percent of GCR arrangements (46 products)
- For GCR arrangements terminated in the review period, product issuers took steps to rebate product holders in relation to 755 products
- Product issuers estimated that $266.7 million was rebated to product holders over the review period, mostly through fee reductions. During the review period, there was no mandatory requirement to rebate to product holders
Click here for the ASIC report on the Treasury website.
