The Financial Services Council wants clarity from Treasury on draft regulations around the grandfathering of existing clients, which continues to muddy the conflicted remuneration provision of the Future of Financial Advice (FoFA) reforms.
Earlier this month the Australian Securities and Investments Commission (ASIC) released Regulatory Guidance 246, its final guidance on conflicted remuneration, but elements of this are dependent on how Treasury deals with grandfathering.
According to a Professional Planner poll, 70 per cent of advisers are unhappy with the current state of conflicted remuneration regulation.
Submissions to Treasury closed last week and the FSC took the opportunity to put its views on the record. It remains of the opinion that grandfathering of existing clients must apply on a consistent basis for platform operators, product issuers, service providers across superannuation, managed investments, life insurance policies, deposit products and other securities.
Get your definitional limits lined up across platforms
“The FSC welcomes the proposed regulations, which aim to provide competitively neutral grandfathering provisions for all platforms,” said the FSC’s senior policy manager, Cecilia Storniolo.
“However, we note that the definitional limit of the platform provisions to a 1012IA platform only grandfathers some platforms and then creates differences in the treatment between the custodial and non-custodial platform.”
In its submission, the FPA calls for grandfathering to apply consistently both at the product issuer/dealer group level and at the dealer group/adviser level.
This would mean that regulations would need to be amended to ensure that payments grandfathered at the product provider level should remain grandfathered when shared with employees or advisers.
“We can see no basis in policy to apply different grandfathering rules at different levels of the payment chain. To do so would impose a significant burden on dealer groups and their representatives,” said Storniolo.
“There is a considerable administrative advantage to being able to identify a payment at source as either prohibited or not prohibited, and on that basis, being able to pass it through.
“If payments are acceptable at one level but not at the next, then the next payer in the chain must add a further administrative filter which is unexpected and has not been captured within the scope of regulatory change programs.”
Further, to the extent that benefits from platforms to licensees and non-platform (licensee to adviser) are applied inconsistently, the FSC believes this will have significant impacts on a dealer group’s ability to administer the grandfathered payments it can pass through to advisers compared with what it receives from a platform.
“Again this creates unnecessary complexity,” said Storniolo. “We believe that the intention of the regulations should be to allow equal treatment of payments within the industry and, at a minimum, we would request that Treasury clarify this.”
