Sent: 18-05-2010 10:02:06
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Banning Financial Planner Commisions
Yesterday the Government released a website about the new remuneration rules that will apply to financial planners.
The website contains a Frequently Asked Questions section which provides a few more details about the proposed arrangements.
For example, we're told that the new rules banning commission payments will be applied prospectively. That is, any arrangements put in place before 1 July 2012 will be exempt from the ban.
This will mean that trail commissions can continue to be paid after this date without the need for the client's annual "opt-in" to the payment structure.
The website says, "it is fair to apply the changes on a go forward basis".
It is reasonable to assume that many advisers either will be working hard to find as much business as possible between now and the proposed start date of these new rules or will be hoping for a change of Government.
The Coalition has said it is against the Government's proposed changes to financial planners remuneration.
For what it's worth it is my expectation that a change of Government this year would delay the banning of planner commissions but it would not stop it. In other words the change will be made (with some slight adjustments) but its commencement date would probably be later than July 2012.
It seems reasonable to conclude that the Howard Government was moving slowly but surely to banning commissions and there is no reason to believe that the same would not happen with a new Coalition Government if that were to occur.
The net impact is that changes in Government rules alter market behaviour and often creates new business opportunities which otherwise wouldn't exist. The prospective banning of commissions will have this impact.
Presumably the value of existing trail commission businesses will increase.
Class Actions Against Banks
The next issue is the impending class action against many Australian banks for overcharging penalty fees. I'm not competent to comment on this actual case and its merits.
That said, it will be interesting to see how hard the banks fight. The reaction of the ACCC, if any, will also be interesting.
It occurs to me that if such an action is being run against banks then it might not be long before similar action is launched against other areas of financial services. The complexity of financial products make these cases hard to run but it doesn't mean someone will not try.
"Near enough is good enough," has often been an unwritten and unspoken mantra in retail financial services (which would be completely unacceptable in many other industry sectors).
Perhaps we are being given a warning that this widespread approach has passed its used by date.
Finally please consider purchasing a copy of my book. You can look at the contents page at the following link: http://www.atcbiz.com.au/r.php?r=0mjd6ne
The second edition has just been released.
Two options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST). The book can be purchased at the following link: http://www.atcbiz.com.au/r.php?r=5a4agqb
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