The Association of Financial Advisers (AFA) has called for clarity about how conflict of interest rules relating to volume bonuses will be dealt with under Future of Financial Advice (FOFA) laws that are being applied progressively from this month.

The issue is one of several with will be dealt with by a FOFA working group established by the AFA.

“The marketplace has moved from a political process to a regulatory process with FOFA and this [working group] is about getting practitioners and licensees ready to deal with the new regulatory framework,” CEO Richard Klipin told insuranceNEWS.com.au.

Several industry groups are already focusing on the application of FOFA’s new regime and “this is a way for them all to come together”, he said.

One issue of concern is how FOFA will deal with volume bonuses that large providers of financial products pay to large distributors, which Mr Klipin describes as relating to “the distribution margin rather than commissions”.

The payment of commissions to advisers from product-providers will be banned when FOFA becomes mandatory next July, but volume bonuses will only run foul of the law where they represent a conflict of interest.

“We want to clear up what the FOFA legislation means by a conflict of interest,” Mr Klipin said.

Financial Services Minister Bill Shorten says volume bonuses will be allowable under FOFA where advisers can show the bonuses are not in conflict with advice to clients.

The legal status of volume bonuses is vital to the industry as they help underpin its economic model.

The FOFA working group will work with regulators and industry members in evolving new operating standards as the Australian Securities and Investments Commission progressively releases guidelines on how FOFA will be applied through the year.

“The implementation of the legislation is definitely the focus of our working group,” Mr Klipin said.