The timeshare industry will be allowed to continue remunerating its employees through sales-based commissions after what the coalition described as a backdown by government.
The decision effectively carves out longstanding remuneration arrangements in the timeshare industry from the ban of commission-based payments included under the Future of Financial Advice (FoFA) reforms.
However Minister for Financial Services and Superannuation, Bill Shorten, contends that the legislation was never meant to impact on the estimated 4000 Australians employed in 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 Shorten in a statement.
“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.”
The final Parliamentary Joint Committee (PJC) on Corporations and Financial Services inquiry report made no specific recommendations relating to the timeshare industry.
Red tape unravelled
While the government announcement appears to address what appears to be an unintended consequence of the reform package, the coalition took the opportunity to play off the front foot.
“Not even Labor ever intended for timeshare to be caught up in their complex FoFA changes and additional red tape,” said Senator Mathias Cormann.
“Bill Shorten’s bungling of FoFA created unnecessary uncertainty for the timeshare industry, which is one of the fastest growing and most resilient segments of the accommodation and tourism industries.”
He again called for the government to examine the opposition’s “constructive suggestions” to fix FoFA, which Cormann argues remains “unnecessarily complex and in large parts unclear”.
The former chair of the PJC on Corporations and Financial Services, Bernie 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,” he said.
“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.”
Both the PJC 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).
What and absolutely brilliant idea !
Step one; exclude grief for crooks in time-share?
Step two : penalise hard-working souls trying to do the right thing in other financial services, make life impossible and quality advice inaccessible to punters
Step three: Crooks in financial services shift to time-share
step four:make a claim to fame that financial services industry cleaned up-
job done
Shorten for Prime Minister
My parents were sold a ‘holiday club’ (read timeshare) membership while aged in their 60s. Tidying things up after my father died I was informed by the club that his membership did not expire upon his death.
I found in the fine print that it was an 80-year contract that my now widowed mother (and upon her death the rest of the family) would continue to be liable for unless we could sell the ownership (fortunately, we did – though we virtually had to give it away).
If she refused to pay the annual fees, about 73 years of liability would be brought forward.
Commissions only provide an incentive to push such offers hard. I was very disappointed to read of this carve-out.