Independents back Bowen's changes

A number of independently owned dealer groups have broadly supported regulatory changes put forward by Minister for Financial Services Chris Bowen, including the banning of volume rebates.

Several dealer group heads expressed concern that some of the changes seemed to favour banks and institutions over independently owned dealer groups, while the loss of volume-based remuneration from geared services as well as the introduction of an opt-in method for adviser charging worried some.

In general, dealer groups said there would be minimal implementation issues arising from the proposed changes, and businesses would be largely unaffected by the removal of volume rebates.

Infocus managing director Darren Steinhardt said that most of the proposed changes were both welcome and expected, and while Infocus did receive some income from volume rebates, the impact of removing them would not be significant for businesses.

“There is a requirement to really ensure that we have that trust and transparency, so you’ve got to remove as many of those volume-based things as possible,” Steinhardt said.

Removing volume-based payments from geared services would be more of an issue, Steinhardt said.

“The inability of having a ‘funds under advice’ charging mechanism for geared portfolios is a little bit problematic. If the business is going to continue providing geared portfolios or gearing services to clients [the issue is] you’ll be taking on a commercial business risk, but you don’t have the ability of charging or getting a risk premium to do that,” he said.

Michael Carter, head of IOOF subsidiary Bridges Financial Services, said Bridges would be unaffected by the loss of volume rebates and the proposed changes would be broadly positive for the industry as a whole, improving consumer trust and confidence.

“The main issue we see is the opt-in requirements arguably need some clarification and refinement,” Carter said.

Matrix managing director Rick Di Cristoforo said changes to volume rebates and gearing would not have a major effect on the Matrix business.

"It is a concern from the point of view that we want to know how it will pan out, how it actually works, what will come out of it [but] volume rebates on product, on investment product is not something that we’ve passed onto advisers anyway," he said.

"To the extent that we’re unsure what the scope is, that’s where the question and concern is."

Di Cristoforo is also concerned the changes could effectively be pro-bank and pro-institution, even if that was not Bowen’s intention. Steinhardt agreed that banks and institutions would gain a competitive advantage in terms of product and distribution.

Synchron director Paul Riegelhuth said Synchron would be minimally affected, and did not rely heavily on volume rebates.

Snowball managing director Tony McDonald said Snowball had been updating its remuneration structure for the past 18 months irrespective of proposed changes.

An internal email sent by AXA to its financial planning practices regarding Bowen's reforms, and obtained by Money Management, suggested the company was also concerned about the removal of volume rebates.

"There are some proposals, such as the ban on volume bonuses, that may have a greater impact on our advice businesses. We are keen to obtain more detail on this proposal and input before we can accurately articulate any potential implications of this reform on your business," the email stated.