In a document entitled Commissions by another name, ISA laid out nine ways in which “commissions and kickbacks have been reintroduced by the Government and banks”.
ISA said the reintroduction of conflicted remuneration will be achieved via the general advice exemption; allowing commissions on execution services; allowing banks to pay commissions on all basic banking products; and permitting ongoing asset fees indefinitely.
Furthermore, ISA pointed to commission-based bonuses being paid to bank financial advisers via ‘balanced scorecards’; the extension of grandfathering so commissions can be ‘traded’; the transfer of commissions from one super product to another product with the same provider; the creation of an exemption for ‘permissible revenue’ to allow commissions to be paid; and allowing banks to pay wholesale commissions to advisers based on volume of sales.
In response, the Financial Services Council (FSC) published its own document, entitled The Truth about FOFA, which refuted the ISA claims point by point.
FSC chief executive John Brogden labelled the ISA document part of a “scare campaign” that is being “orchestrated” by ISA.
“The FOFA regime is not being wound back. It is not opening up the industry to commissions. And it is not removing the best interests duty,” said Mr Brogden.
“The existing FOFA law along with the regulation introduced by the government on 30 June explicitly bans commissions on general advice. This exemption means financial planners cannot earn a commission for general advice,” he said.
Nor do the execution-only provisions re-introduce commissions, said Mr Brogden – and the provisions governing ongoing asset-based fees have not been amended by the government.
“Australia’s FOFA legislation is being used as a global benchmark because there is nothing anywhere else in the world that comes close to it in terms of consumer protection. The FOFA amendments support this position,” he said.
The Australian Bankers’ Association (ABA) also took aim at ISA for “misrepresenting banks and other financial services providers”.
ABA chief executive Steven Münchenberg said ISA is “clearly running an anti-bank campaign which aims to scare consumers with misconceptions about bank practices and misinterpretations about the law”.
“This campaign is merely an attack on businesses that are competitors to [ISA’s] members,” said Mr Münchenberg.
“The ISA makes a number of incorrect claims about commissions, sales incentives and the existing law, claiming the government is introducing new loopholes or caveats,” he said.
“The ISA either misunderstands or misinterprets the existing law, or simply wants to perpetuate an anti-bank campaign to serve their own interests,” said Mr Münchenberg.
Association of Financial Advisers chief executive Brad Fox also entered the fray, expressing his “dismay” at the “latest claims made by the ISA”.
“The assessment of incentives is erroneous, inaccurate and appears intentionally misleading. On such a critical issue, Australians are entitled to hear the facts, not a compilation of fairy tales from a vested interests group,” said Mr Fox.
“It is an absolute fallacy that commissions and new sales incentives have been introduced for financial advisers by the FOFA Amendments,” he said.
“The ABC Fact Check team, for example, has expressed a very clear view about the inaccuracies of that argument. The recent announcement from ASIC calling for industry super advertisements to be amended adds further weight,” said Mr Fox.
