Treasury clarifies position of salaried advisers
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The Treasury has provided further clarity on how salaried bank financial advisers will be dealt with as part of the proposed Future of Financial Advice reforms.
The reforms include the introduction of the statutory fiduciary duty that financial advisers must act in the best interests of their clients. Some have expressed concerns that if this were the case, salaried advisers at large institutions and banks, which are arguably a main distribution channel for financial products developed by their employers, would be in a precarious position.
A spokesperson for the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, stated that this was not the end of salaried advisers but rather remuneration structures that create a conflict of interest.
“The reforms were designed to eliminate conflicted remuneration structures. Remuneration for advice services rendered is paid for by the client and is no longer commission-based. It is open to employers to pay a salary to employees for advice services provided by their advisers,” the spokesperson said.
Bowen’s office reiterated that under the reforms, banks and other institutions could still distribute their own products and the adviser would have to be remunerated by the client.
However, Bowen’s office also stated that an employer, including a product provider, of a financial adviser could pay standard employee remuneration, but the adviser must comply with their fiduciary duty.
“The reforms will clearly see some structural change within the industry,” the spokesperson stated. “The outcome of the reforms should [reflect advice to clients becoming] more independent and product neutral.”
While some might have heaved a sigh of relief that soft-dollar incentives have not been addressed in the proposed reforms, it seemed they were not off the discussion table just yet.
“The newly established expert advisory panel, in relation to its review of ethical standards, will consider whether these payments are consistent with those standards,” the spokesman said.
“The Government will consider all relevant information in making a decision about soft-dollar benefits. The Treasury will advise the Government as to the best way of extending the ban on conflicted remuneration structures to material soft-dollar benefits.”
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