The financial services industry is effectively “on hold” until the proposal to grandfather existing remuneration from the ban on conflicted remuneration is passed through Parliament, says the Financial Planning Association.
Dante De Gori, general manager of policy and government relations, spoke to Wealth Professional
in light of Friday’s revelation that the Streamlining of Future of Financial Advice (FoFA) Bill 2014 had been referred to the senate economics and legislation committee for inquiry and report.
This latest FoFA upset came after its mouthpiece, Assistant Treasurer senator Arthur Sinodinos, stepped down after being named in a major corruption case.
De Gori said the most damaging part of the delays - which could mean many months more of submissions and consultations - were in relation to the FoFA proposal to grandfather existing remuneration from the ban on conflicted remuneration.
The “complicated” situation means changes are being made to both legislation and regulation – and while the bill itself is now facing further inquiries, the regulations are due to be tabled this week.
“It’s likely the opposition will reject these regulations, which means we could be back to square one,” said De Gori. “The concern is that the regulation to amend grandfathering in itself has stagnated the market in respect to financial planners purchasing and selling businesses and moving licensees.”
If the regulations are disallowed as expected, grandfathering will be caught in this too, whereas it could have been dealt with separately due to its urgency, De Gori said.
The grandfathering amendment would broaden the circumstances under which conflicted remuneration can continued to be paid.
As long as the client maintains their interest in a financial product, the proposed amendment would allow advisers to move licensees and continue to access grandfathered benefits – currently any move after 1 July 2013 causes this grandfathering to cease.
And aside from the domino effect on grandfathering, the decision to refer the bill to the economics and legislation committee for further inquiry has created even more uncertainty, said De Gori.
“It could mean that nothing really happens to the FoFA reforms [for some time]. It depends what the report says, there might be more amendments,” he said. “It does provide a bit of uncertainty and because it is so prominent in the media there’s confusion amongst consumers and financial planners about what is happening.”
The FPA expect there to be a further round of hearings and submissions. De Gori said the committee report date of June 16 indicates that there may be a submission process in April, and hearings in May.