More than 4,000 employees of the timeshare industry will benefit from a carve-out from the ban on conflicted remuneration under the Future of Financial Advice (FOFA) reforms, allowing the industry to continue to remunerate its employees through sales-based commissions.
The exemption has been achieved through regulations to the FOFA reforms.
The FOFA reforms were announced by the Government on 26 April 2010 in response to a Parliamentary Joint Committee on Corporations and Financial Services inquiry report. The inquiry was commissioned in the wake of the collapse of Storm Financial and Opes Prime and chaired by the current Parliamentary Secretary to the Treasurer, Bernie Ripoll.
While the final report made recommendations in relation to financial advice, none of these related specifically to the timeshare industry.
“The timeshare industry was never the intended focus of FOFA and I have never sought to remodel their current remuneration practices”, said Bill Shorten, Minister for Financial Services and Superannuation.
“Timeshare products are sold as ‘lifestyle products’ and are not designed to generate a return on investment for consumers.
“Other aspects of the FOFA reforms, including the obligation to act in the best interests of clients, will continue to have full application to the timeshare industry where sales staff provide financial advice to clients”, said Mr Shorten.
Mr Ripoll said that this was the right decision for the timeshare industry.
“To ensure that consumers are adequately protected, the Gillard Government has asked the industry and Treasury to explore options to improve the disclosure of timeshare products, to ensure that prospective clients understand the financial risks and conditions of timeshare arrangements.
“The decision is the outcome of extensive consultation with the timeshare industry which showed that timeshare products, while defined as a managed investment scheme under the Corporations Act 2001, are inherently different compared to the financial products advisers typically advise their clients on”, said Mr Ripoll.
Both the Parliamentary Joint Committee and the Senate Economic Committee recommended that the timeshare industry be precluded from the ban on conflicted remuneration.
The carve-out for the timeshare industry from the ban on conflicted remuneration has been implemented through the recently made Corporations Amendment Regulation 2012 (No. 4).