The government will move to ban commissions as part of a wide range of new reform measures announced yesterday.
The measures were in response to the Parliamentary Joint Committee on Corporations and Financial Services' inquiry into financial products and services in Australia.
Commissions, including trail commissions, will not be permitted under the new reform regime. There must be separate fees for the product and advice.
Advice fees, charged as a percentage of the clients' funds under management and paid by the client to the adviser or licensee in relation to the provision of advice, will also be banned.
Other forms of remuneration such as shelf space fee payments, volume-based fees or sales incentives will also be banned.
Other types of fee for service for advice, however, will be allowed.
The measures also include the introduction of adviser charging that will allow the investor to be able to opt in to the advice in response to a compulsory annual notice.
The government will also look at introducing a statutory fiduciary duty so that financial advisers must act in the best interests of their clients, and will expand the availability of low-cost, simple advice.
ASIC's powers will also be strengthened in relation to the licencing and banning of people from the financial services industry.
ASIC will now be able to consider a broad range of matters when determining whether to issue, cancel, or suspend a licence.
The government will also look at reversing the current situation where accountants do not need to hold an Australian financial services licence when establishing a self-managed superannuation fund.
The establishment of a statutory compensation scheme has also been proposed by the government and will be examined by corporate law expert Richard St John.
"It gives me great pleasure to announce significant reforms to the provision of financial advice, which I believe will improve the quality of advice, strengthen investor protection and underpin trust and confidence in the financial planning industry," Minister for Superannuation Chris Bowen said.
