Anti-grandfathering arguments “simplistic,” says AFA
Calls for a banning of grandfathered commissions are simplistic and ideological and overlook the greater complexity of the issue, according to Association of Financial Advisers general manager, policy and professionalism, Phil Anderson.
In an opinion piece to be published in the next print edition of Money Management, Anderson has argued that before any move is made to quickly end grandfathered commissions, the ultimate objective needs to be identified.
“What has not been addressed in the discussion so far, is the policy objective behind a call for a ban on grandfathered commissions,” he said. “Is it simply to pursue an ideological view that all commissions are bad? Is it to cut off this revenue stream for advisers? Or is it to better ensure that clients are being serviced by their advisers?”
“We hope the core reason is to help clients currently caught in poor, high-cost, legacy products. But we are concerned that those calling to end grandfathered commissions are throwing a broad net over this complex issue. The debate should be driven by the interests of clients and their ability to choose whether they want advice and how they want to pay for that advice.”
Anderson also argues that there needs to be a fundamental starting point for the debate around ending grandfathering and that the starting point should be an accurate assessment of how much adviser revenue is generated by grandfathering.
He said that while the Royal Commission had relied on the evidence of one witness that 60 per cent of licensee income was derived from commissions, this was contradicted by Investment Trends data which suggested the figure was closer to nine per cent.
“This fundamentally changes the argument,” Anderson said. “It is essential that we have an agreed starting point for such an important decision.”
“The simplistic ideological calls for a ban on grandfathered commissions are just that – simplistic and ideological,” he writes. “In reality, the matter is much more complex.”
“We should be focussing on what the core policy objective is, which must be to assist clients caught in poor, high-cost, legacy products. If we accept this as the objective, then we should be arguing for regulatory changes that help these clients, including banning exit fees, capital gains tax relief and Centrelink exemptions, rather than placing all the consequences and obligations on the financial adviser community.”
Recommended for you
Net cash flow on AMP’s platforms saw a substantial jump in the last quarter to $740 million, while its new digital advice offering boosted flows to superannuation and investment.
Insignia Financial has provided an update on the status of its private equity bidders as an initial six-week due diligence period comes to an end.
A judge has detailed how individuals lent as much as $1.1 million each to former financial adviser Anthony Del Vecchio, only learning when they contacted his employer that nothing had ever been invested.
Having rejected the possibility of an IPO, Mason Stevens’ CEO details why the wealth platform went down the PE route and how it intends to accelerate its growth ambitions in financial advice.
