Consumers will benefit from lower fees following the removal of conflicted remuneration for financial advice after the Coalition Government passed new laws through the Parliament yesterday, ending the payment of grandfathered conflicted remuneration.
Conflicted remuneration is where the payment of a benefit to a financial adviser may incentivise them to recommend a financial product to a consumer that may not be in their best interests.
One of the key recommendations of the Royal Commission was to end the payment of grandfathered conflicted remuneration to financial advisers. With the passage of this legislation, the Government has delivered on this recommendation.
Grandfathered conflicted remuneration can compromise the quality of advice as financial advisers may be unwilling to switch consumers into newer, better products if it means the adviser will lose their entitlement to grandfathered conflicted remuneration.
Ending grandfathering will also benefit consumers as they will no longer have to pay higher fees that are needed to fund the payment of conflicted remuneration to an adviser.
Under the legislation, grandfathered conflicted remuneration will be banned from 1 January 2021 and product issuers will be required to rebate the amounts to consumers.
To support this legislation and facilitate the transition, the Government has directed ASIC to monitor and report on the extent to which product issuers are acting to end the grandfathering of conflicted remuneration in the period between 1 July 2019 and 1 January 2021.
The Government is taking action on all 76 recommendations contained in the Final Report of the Royal Commission and, in a number of important areas, is going further. Restoring trust in Australia’s financial system is part of our plan for a stronger economy.