ISA wants ASIC audit of orphan commissions
Industry Super Australia (ISA) has asked the Australian Securities and Investments Commission (ASIC) to urgently investigate the extent of “orphan commissions” capable of swelling the coffers of the major banks as a result of grandfathering.
The call has been made by ISA chief executive, David Whiteley who said the investigation is needed in circumstances where a recent report by Rice Warner had shown that current grandfathering arrangement stand to cost Australian consumers $6.1 billion over the next eight years.
He claimed the extension of grandfathering would cost consumers an additional $2.8 billion over the next 14 years.
“Orphan commissions” are where the financial institution does not pay the commission to a financial planner or rebate them back to the consumer,” he said, adding that the banks had “lobbied to wind back iron-clad consumer protections and replace them with fine print and loopholes”.
“They are also seeking to extend the grandfathering of commissions,” Whiteley claimed.
“Now it’s time for ASIC to have a good look under the bonnet. An investigation by ASIC, requiring the big banks to disclose just how much planners stand to gain at the expense of consumers, and how much is going straight back to the major banks,” he said.
Whiteley said the ISA had asked ASIC to urgently investigate, through a survey of major financial institutions, the extent of “orphan commissions” to better inform the public debate regarding the legitimacy or otherwise of the proposed extension of grandfathering provisions.
“In our view it would be unconscionable to extend the grandfathering of commissions, a process which will ultimately erode the savings of Australians, including compulsory super, if the commissions were not even to achieve their intended purpose of assisting financial planners, but were instead used the bolster the profits of the major banks and financial institutions,” he said.
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