5 years ago
FIRST VOTE ON BANKING ROYAL COMMISSION RECOMMENDATION
Senator Rex Patrick
The Senate will have its first opportunity tomorrow to vote on one of Commissioner Hayne’s 76 recommendations.
The Banking Royal Commission highlighted millions of dollars in conflicted remuneration were still being paid in return for no advice. This is completely unacceptable.
Commissioner Hayne stated in his final report:
“In the Interim Report, I posed the following question: If the premise for the conflicted remuneration provisions is accepted (and no‑one suggested that it should not be) how can the grandfathering provisions be justified today? In my view, the answer to that question is now clear: they cannot.”
“For grandfathered commissions, the time when the initial advice was given and the initial conflict arose has passed. The influence of the commission has already done its work once. But the problem remains. The influence continues. Advisers have an incentive to keep their clients in products with grandfathered commissions rather than advise them to move to better products. There can be, and is, no justification for maintaining the grandfathering provisions.”
This recommendation been accepted by both the Government and the Labor Party.
The Government has said they will end grandfathered commissions with a timetable for removal of 1 January 2021. Labor has said it should be now.
Senator Patrick’s bill, which was released for comment on 1 October 2018 and forms the basis for the amendment, has a date of 1 July 2020. This is an appropriate transition time and a compromise between Labor’s proposed time frame and that of the Government's.
“The sunset on grandfathered commissions will act as an incentive for advisers to engage with their clients and move them out of those products. In practice, the amount may be quite small by 1 July 2020 but that would mean the law has done its job," said Rex.
The amendment will phase out grandfathered conflicted remuneration by 1 July 2020 and ensure that the value of any payments made after this date are rebated to clients.