Will ASIC’s review tell the whole story on grandfathering?
Grandfathering will come to an end in the Australian financial services industry before the Government actually gains a comprehensive and final picture of potential adverse client outcomes from the Australian Securities and Investments Commission (ASIC).
What is more, ASIC’s final report to the Treasurer, Josh Frydenberg, will not encompass data about the number of individual financial advisers who have been receiving grandfathered remuneration.
These facts have been laid bare in an ASIC answer to a question on notice from the Parliamentary Committee on Corporations and Financial Services which makes it clear that while grandfathering will end on 1 January, 2021, ASIC will not be delivering its final report until six months’ later on 30 June, 2021.
ASIC said that in building that final report it would be “seeking to understand factors which impact the ending of arrangements, including potential adverse client outcomes” including those relating to exit fees, capital gains tax and Centrelink.
The ASIC answer said the regulator was obtaining data about the number product providers and products that pay grandfathered conflicted remuneration, the dealer groups and advice licensees who received conflicted remuneration and the “client accounts that grandfathered conflicted remuneration is paid in respect of”.
However, ASIC said it was not obtaining data about the number of individual financial advisers that dealer groups/advice licensees passed grandfathered conflicted remuneration on to.
“ASIC’s quantitative review includes life insurance and annuity product providers to the extent that they were identified as payers of grandfathered conflicted remuneration,” it said. “The ability of product providers to rebate or impediments to them doing so is an issue ASIC intends to explore with a sample of product providers in its qualitative review.”
The ASIC answer to the question on notice has come amidst expressions of concern from groups such as the Association of Financial Adviser (AFA) about the legislation having been imposed without the benefit of a regulatory impact statement.
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