Legacy products here to stay

Legacy products and commission payments associated with them will continue to be a factor in adviser remuneration, but that doesn’t mean the conflict will remain, according to the Financial Planning Association chief executive officer, Mark Rantall. 

Rantall’s comments came after the Australian Securities and Investments Commission (ASIC) highlighted in its latest report - 'Review of financial advice industry practice: Phase 2’ - that most licensees were still receiving commissions and volume-based payments. 

However, ASIC’s report was based on a 2011 questionnaire sent to the top 21 to 50 financial advice groups in Australia. 

“You’ve got to put these things into context,” Rantall said. 

“The survey was done in 2011 and is hardly relevant in August 2013 in terms of timeliness.” 

The transition to a fee-based environment was always going to take time, Rantall added. The question now was how quickly the advice industry would phase legacy books of business out of the system. 

“How quickly can you transition legacy books of business that have been built up over many years? In many cases it is quite appropriate to maintain those legacy products in client portfolios,” he said. 

“You have to look at the best interest of the client - the vast majority of commissions are embedded in products that can’t be eliminated without the sell-down of the product,” Rantall added. 

“But getting out of the product might not be in the best interest of the client.”