In a joint release by Treasurer Josh Frydenberg and Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume, the Government was effectively reinforcing pronouncements it made earlier this year, following the release of the final report of the Banking Royal Commission.
Recommendation 2.4 in Commissioner Hayne’s final report recommended:
“Grandfathering provisions for conflicted remuneration should be repealed as soon as is reasonably practicable.”
conflicted remuneration …can entrench consumers in older products even when newer, better and more affordable products are available
In February, the Government released its exposure draft legislation to ban the grandfathering of conflicted remuneration paid to financial advisers, arguing that this type of remuneration “…can entrench consumers in older products even when newer, better and more affordable products are available on the market.”
The Government’s rationale is that this reform “…will benefit consumers, as they will receive higher quality advice and stop paying higher fees to fund grandfathered conflicted remuneration.”
According to the joint release this week, 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.
In confirming other action it previously said it would take, the Government is including in the legislation a power to make regulations to establish a scheme that will provide that those people paying conflicted remuneration should rebate clients for any remuneration that would be paid after 1 January 2021.
The Government says it has also commissioned ASIC to monitor and report on the extent to which product issuers are acting to end the grandfathering of conflicted remuneration.