The Ending Grandfathered Conflicted Remuneration Bill 2019 was passed in the House of Representatives yesterday but the industry believes the timeline for doing so will leave Australians worse off.
Passing yesterday, the legislation will see the banning of grandfathered commissions from 1 January 2021.
Responding, the Association of Financial Advisers (AFA) has argued thousands of clients will be worse off without grandfathered commissions and a three-year transition period is required to allow advisers time to find alternative solutions for clients impacted by grandfathered commissions.
"We are deeply disappointed at the lack of analysis on the impacts of this reform and the lack of communication and guidance for impacted clients and advisers. At this stage there will be many thousands of cases where a sensible solution is simply not available," Kewin said.
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"We particularly call on ASIC to consider all options to simplify the advice requirements for advisers, so that they can help as many of these clients as possible before the deadline."
He also called on product providers not to turn off grandfathering before the legislated 2021 deadline.
"In many cases, turning off grandfathering before the legislated date will only serve to stop advisers being paid, the benefit may not be passed onto the client and the ongoing servicing will be left to the institution providing the product," Kewin added.
"Some of these advisers have a significant level of debt that is secured by grandfathered commission clients.
"We call on the banks to treat these financial advisers with respect and allow them time to adjust their business models so that they are viable in the longer term. We also call on the Government to carefully monitor the implementation of this part of the reform."
The government introduced the legislation to ban grandfathered commissions at the end of July.
Treasurer Josh Frydenberg and Senator Jane Hume released a joint statement at the time saying: "To ensure that the benefits of industry renegotiating current arrangements to remove grandfathered conflicted remuneration ahead of 1 January 2021 flow through to clients, the government has commissioned ASIC to monitor and report on the extent to which product issuers are acting to end the grandfathering of conflicted remuneration."
"Grandfathered conflicted remuneration can entrench clients in older products even when newer, better and more affordable products are available on the market. Ending the payment of grandfathered conflicted remuneration will remove this inherent conflict and restore trust in the financial advice industry."
The ASIC review will continue until the 2021 deadline.