Australia's Association of Independently Owned Financial Professionals (AIOFP) are gearing to take the government to court, arguing that the royal commission's recommendations to ban so-called "grandfathered" investment commissions is not in the public interest.
The lobby group which represents financial advisers who are not linked to the banks said in a memo sent to its member that it is up for the "fight".
The AIOFP is taking legal advice in relation to a potential challenge to the validity of proposed amendments to remuneration structures without any compensation to members, given what it has labelled the "radical change" in the Commonwealth's position and its stated legislative intention.
This is yet again another attempt by the institutional lobby to starve advisers out of the industry. This time they have gone too far"
"The [banks] have cleverly spun grandfathered revenue into a fictitious story that the monies are sourced directly from consumers and it be returned to them. [That's] total trash," AIOFP executive director Peter Johnston wrote.
"This is yet again another attempt by the institutional lobby to starve advisers out of the industry. This time they have gone too far."
The AIOFP disputes the characterisation of grandfathered commissions by the royal commission as "fees for no service". Instead, it says these payments subsidise the operating costs for a financial advice business allowing it to reduce fees for consumers.
Outlawing these payments would just allow the big banks and other financial product manufacturers to pocket the money instead of passing it on to the independent small businesses that advise the public, pushing the cost of advice up in the process, it said.
Johnston added the action will send a clear message to Canberra that the advice community is prepared to fight against injustice.
"We have had enough of politicians either not bothering to understand the nuances of our industry or considering financial advisers as easy low hanging fruit to exploit for political opportunism," he said.
"At the moment, both sides are feverishly and blindly rushing to legislate against grandfathering without realising it will only give higher profits to institutions, financially disadvantage consumers and crush small business.
The association estimates the cost of challenging the government in the High Court of Australia will be between A$1m and A$1.5m.
