Following the Financial Services Royal Commission, the Australian Government is acting to change the laws surrounding grandfathered conflicted remuneration on superannuation, investment and insurance products.
Conflicted remuneration is a monetary or non-monetary commission given to a financial advisor or planner which is likely to influence the product advice or recommendations they provide to clients.
The Government passed reforms five years ago to ban conflicted remuneration, however kickbacks paid on ‘grandfathered’ accounts - set up prior to 1 July 2013 - were still allowed. Clients may be unaware they are paying these kickbacks because they are usually built into their total account fees. The Government has rightly concluded that the continued payment of these commissions is eroding the superannuation savings of Australians.
The problem with grandfathered conflicted remuneration is that it removes any incentive for financial advisors to find the best product for their clients. Instead, financial advisors may be inclined to keep their clients’ money in existing products instead of moving them into better-suited products because the move might result in lower commissions. Essentially, financial advisors and planners may be inclined to place their own financial interests above the client’s best interests.
However, this is set to change as new laws to extend the current ban on conflicted remuneration to include grandfathered commissions are being passed in Parliament. Financial advisors, planners and product issuers will have until 1 January 2021 to modify their business practices in order to comply with the new laws.
How we can help you
If you are involved in a dispute with a financial adviser or planner, Slater and Gordon can help you by:
- Providing you with advice about your rights as a client
- Assisting you to negotiate a resolution to your financial dispute
- Representing you in any legal proceedings
You can learn more about our commercial litigation services here, or if you have an enquiry about a financial dispute, you can submit an online enquiry below.