Super industry groups have attacked draft laws to ban grandfathered trail commissions, saying they don’t go far enough.

AustralianSuper argues the plan to rebate commissions to consumers will entrench conflicted payments to advisers.

The Treasury proposal says: “Benefits that would otherwise have been paid as conflicted remuneration are rebated to affected clients.”

But an AustralianSuper submission says: “There is no ‘otherwise’ in this proposal – it actually ensures such conflicted arrangements continue unabated, and the consumer may be allowed some rebate if the product provider determines it is ‘just and equitable’ to do so.”

Allowing trail commissions to continue is disingenuous and arguably misleading to Parliament and voters, AustralianSuper says.

It warns clients will not be assured of any rebate. And “just and equitable” is determined by the provider, which will want to keep both consumer and adviser as clients.

Rebating a certain amount to clients does nothing to phase out commissions. Some advisers will continue to receive commissions when they are not providing advice, because if they recommend a new product, they will lose their grandfathered commissions, it says.

The scheme arrangements are legally imprecise, not transparent and potentially work against consumers’ best interests, and are at odds with the recommendations of the Hayne royal commission, AustralianSuper says.

The Financial Planning Association supports rebating commissions to clients as a precursor to phasing them out.

It says clients should receive the full amount of the commission as a rebate.

“Rebating should ideally be a temporary arrangement that reduces over time as clients move from legacy products that are subject to grandfathering arrangements,” it says.

It urges the Government to remove barriers to clients moving from legacy products, including issues related to clients losing insurance coverage.

The Australian Institute of Superannuation Trustees’ submission warns the proposals will allow product issuers to avoid the ban by setting up a rebate scheme.

CEO Eva Scheerlinck says the changes do not remove the incentive for advisers to keep recommending clients stay in poor-performing and expensive products.

“There is no justification for the Government backing away from a full and immediate ban, particularly when the [Hayne] hearings revealed the extensive consumer harm caused by conflicted financial advice,” she says.

The rebate proposal is unnecessarily complex and flawed in placing the onus on product issuers to do the right thing, she says. The corporate regulator shouldn’t be forced to divert resources to monitor whether rebate schemes are in the best interests of members.

The Association of Financial Advisers is also opposed to the draft laws, arguing the rebate proposal creates huge complexity, with every rebated amount carrying tax implications.

“If the outcome was the rebating of a grandfathered commission and the introduction of an adviser service fee, there will be a lot of additional transactions on their account for no benefit,” it says. “In fact, the fees are likely to increase due to the additional complexity.”