The Coalition Government yesterday passed legislation through the House of Representatives to end the payment of grandfathered conflicted remuneration to financial advisers.
Conflicted remuneration is where the payment of a benefit to a financial adviser may incentivise them to recommend a financial product to a consumer 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. Ending the payment of grandfathered conflicted remuneration will remove this inherent conflict and restore trust in the financial advice industry.
One of the key recommendations of the Royal Commission was to end the payment of grandfathered conflicted remuneration to financial advisers.
With the passage of the Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 through the House, this recommendation is on its way to becoming law. Under the Bill, conflicted remuneration paid to financial advisers will be banned from 1 January 2021.
To support this legislation and to ensure that the benefits of removing grandfathered conflicted remuneration 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 in the period between 1 July 2019 and 1 January 2021.
The Government is taking action on all 76 recommendations contained in the Final Report of the Royal Commission and, in a number of important areas, is going further. Restoring trust in Australia's financial system is part of our plan for a stronger economy.