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Grandfathered remuneration ban to benefit advice clients
Grandfathering of conflicted remuneration paid to financial advisers looks likely to be banned, after the government announced it would be tabling legislation on the issue in Parliament this week.
Grandfathered remuneration ban to benefit advice clients
Grandfathering of conflicted remuneration paid to financial advisers looks likely to be banned, after the government announced it would be tabling legislation on the issue in Parliament this week.
Conflicted remuneration is where the payment of a benefit to a financial adviser may incentivise them to recommend someone a financial product despite it not being in their best interests, as explained in a joint media release from Treasurer Josh Frydenberg and the assistant minister for superannuation, financial services and financial technology, senator Jane Hume.
Grandfathered conflicted remuneration “can entrench clients in older products even when newer, better and more affordable products are available on the market”, it was outlined.
The parliamentary members flagged that one of the key recommendations of the Hayne royal commission was to end the payment of grandfathered conflicted remuneration to financial advisers.
Mr Frydenberg said the reform contained within the legislation that is to be tabled Thursday, 1 August, will benefit retail clients “as they will receive higher quality advice and stop paying higher fees to fund grandfathered conflicted remuneration”.
As per the Treasurer’s statement, the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 expects to end the use of grandfathering of conflicted remuneration by 1 January 2021.
The bill also aims to enact a power for the making of regulations “to establish a scheme that will provide that those people paying conflicted remuneration rebate clients for any remuneration that would be paid after that 1 January 2021 cut-off date.
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