The Coalition Government will introduce legislation on Thursday 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 will benefit retail clients, as they will receive higher quality advice and stop paying higher fees to fund grandfathered conflicted remuneration. Commissioner Hayne made it very clear in the Royal Commission Final Report that this grandfathering shouldn't continue.
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.
We are also going further, by including in the Bill a power to make regulations to establish a scheme that will provide that those people paying conflicted remuneration rebate clients for any remuneration that would be paid after 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.
The Government is taking action on all 76 recommendations contained in the Final Report of the Royal Commission and will continue to take the necessary steps to restore trust in Australia's financial system.