Industry Super Australia (ISA) has identified nine ways the Government’s regulations have brought back commissions and other incentives for financial advisers to sell superannuation and other products to Australians.
While the Government is considering its response into the Senate Inquiry into ASIC and Commonwealth Bank (which recommended a Royal Commission), it has also removed a raft of consumer protections for people seeking financial advice.
The fine-print of the regulations reveals a range of loopholes and caveats.
“Despite assurances from the Government that the ban on conflicted remuneration will remain, ISA has identified nine ways in which commissions, sales incentives and conflicted remuneration have come back,” Mr Whiteley said.
“When you analyse the fine-print, it is clear that the banks’ lobbying has been successful and they will once again be able to pay incentives to financial advisers to sell their products.
“Financial advisers cannot act as impartial advisers and receive sales incentives from banks.
“Once again, people seeking financial advice will need to wary of being sold something as well”, said Mr Whiteley.
Nine ways commissions and kickbacks have been reintroduced by the Government and banks:
- The general advice exemption – which provides significant scope for advisers to get around the ban on commissions and conflicted remuneration
- Allowing commissions on execution services – a loophole to keep commissions by having a different adviser execute or implement the advice that another adviser initially provided
- Allowing banks to pay commissions on all basic banking products extending the already broad exemption for basic banking products so that it applies for all staff including financial planning staff
- Permitting ongoing asset fees indefinitely
- Commission-based bonuses paid to bank financial advisers via ‘balanced scorecards’ to incentivise product sales – only bonuses that didn’t include product sales targets were allowed under FOFA
- Extending grandfathering so commissions can be traded – advisers would continue to receive grandfathered commissions without client approval when they move between licensees
- Permitting commissions to be automatically transferred from a client’s super product into a new pension product with the same provider
- Creating an exemption for ‘permissible revenue’ to enable commission based bonuses to be paid
- Allow banks to pay wholesale commissions to advisers based on volume of sales – opaque commissions worth billions.