Home / Life Insurance / ASIC chases information on grandfathering
21 October 2019
The Australian Securities and Investments Commission (ASIC) is asking product providers for information about their grandfathered commissions arrangements in the lead up to the ban in January 2021.
The regulator wants to know what product advisers were paid commissions for, the dollar amount paid and what percentage it represents, whether they have ended their grandfathered commission arrangements or renegotiated them, and whether it intends to pass on the benefits to clients.
The grandfathering ban passed the Senate last week. Product issuers are required to rebate the amount back to consumers.
The purpose of the review is to explore why product providers have or haven’t ended grandfathered commissions and how the rebating arrangements are working in practice. ASIC will also use the review to highlight cases where product providers have ended their grandfathered commissions payments. ASIC expects to deliver its final report to the Treasurer by June 30 2021.
Association of Financial Advisers CEO Philip Kewin says product providers “must, and we stress must, pass on the full benefit to the client”.
“This does not mean ‘where practicable’, or ‘generally’, it means all commissions, volume and shelf space payments. Ceasing these payments must be to the benefit of the client. Otherwise, why are we doing this?”
The outcome of the ban will be devastating to those advisers who took out loans to buy a book of grandfathered commission clients and now must repay the loan on an asset that has no value, he says.
He is calling on banks who have lent money to advisers using grandfathered commissions as security to be flexible towards advisers.
Advisers need guidance from the Government on how to upgrade clients to other products without being negatively affected, he says.