The Association of Financial Advisers (AFA) in Australia has told members that it will stand up against the Hayne royal commission on the issue of grandfathered commissions as the big four banks and AMP have capitulated and agreed to give them up.
AFA claims there is no evidence of grandfathered commissions being the cause of bad advice.
“We have continued to argue against this proposal on the grounds that there have been no case studies identifying grandfathered commissions as a cause of poor advice and a lack of research on the nature and extent of the grandfathered commissions issue,” AFA chief executive Philip Kewin said in a statement.
Banning legacy commissions would also lead to peripheral costs for advisers and sharp reductions in the value of advice practices and linked buyer of last resort (BoLR) agreements, the AMP advisers have added.
AMP has told the royal commission that legislative measures to remove grandfathered commissions risk extinguishing the property rights of existing contracts and, accordingly, AMP would not support such a legislative measure.
“However, in light of community sentiment surrounding grandfathered commissions, AMP supports transition away from grandfathered commissions in a manner and time frame agreed with the industry together with appropriate legislative reform,” AMP said in submission filed with the royal commission.
The wealth giant also has requested clarification about “community expectations” and believes a “mechanism” should be established to help the government hold ASIC accountable for its performance.
“Additional resourcing may go some way to enable ASIC to act more promptly, but care needs to be taken, given that ASIC is industry funded, to ensure that due process and due accountability is embedded in any new regulatory structures or procedures,” the group said.