The Government’s bill to ban grandfathered commissions will make product providers responsible for rebating any adviser commissions back to customers, Treasurer Josh Frydenberg says.

The bill was introduced to Parliament last week and hasn’t yet passed the lower house. Any rebates will flow from January 1 2021.

Both the Financial Planning Association (FPA) and the Association of Financial Advisers (AFA) are criticising the lack of guidance on how to implement the rebate so that it benefits consumers.

“We haven’t seen details of how the Government expects this will work,” FPA CEO Dante De Gori said.

“Just because a financial planner stops receiving commissions doesn’t actually mean the consumer stops paying them through their investment fees. The cost of the commission is embedded in the fees, which is why the rebating and monitoring arrangements are so important.”

The AFA says the removal of grandfathered commissions is highly complex because of the huge variety of products, administration systems and client situations.

It has criticised the rushed timeframe and lack of industry consultation on the bill. There has been no assessment of the number of consumers who will be affected.

“It will take some time for the product providers to prepare for these changes, meaning that the proposed window will not be sufficient for either the advisers or the hundreds of thousands of impacted clients,” AFA CEO Philip Kewin said.

“We are particularly concerned that the bill to end the grandfathering of commissions on investment and superannuation products announced by the Government this week does not adequately provide a mechanism for exemptions where the client is better off in their current arrangement.”

He also criticised the Government’s claim in the bill’s Explanatory Memorandum that the Hayne royal commission was an equivalent process to a Regulation Impact Statement.

The FPA estimates that any grandfathering changes could take up to three years to complete.