The Government will introduce legislation to ban the grandfathering of conflicted remuneration paid to financial advisers.
Conflicted remuneration is where the payment of a benefit to a financial adviser may incentivise them to recommend to a consumer a financial product that may not be in their best interests.
Grandfathered conflicted remuneration can entrench clients in older products even when newer, better and more affordable products are available on the market.
One of the key recommendations of the Royal Commission was to end the payment of grandfathered conflicted remuneration to financial advisers.
The Government’s reform is intended to benefit retail clients, so they receive higher quality advice and stop paying higher fees to fund grandfathered conflicted remuneration.
The Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 implements the Government’s response to the Final Report, to end the grandfathering of conflicted remuneration by 1 January 2021.
To ensure that the benefits of industry renegotiating current arrangements to remove grandfathered conflicted remuneration ahead of 1 January 2021 flow through to clients, the Government has commissioned ASIC to monitor and report on the extent to which product issuers are acting to end the grandfathering of conflicted remuneration.
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Source: The Commonwealth of Australia