Can dealer groups retain volume bonuses under the Future of Financial Advice (FoFA) reforms? Do you need to be a mind reader to figure out what the Australian Securities and Investments Commission (ASIC) wants in terms of Codes of Conduct? Can you keep paying commissions under FoFA?

These are some of the questions being fielded by The Fold Legal, prompting the company to launch a “Frankology blog” on its website purely to tackle questions relating to industry reform.

“We believe the industry needs some straight talking on topics that will affect the daily operation of financial services businesses and we are not afraid to tell it how we think it is,” says managing director of The Fold, Claire Wivell Plater, before hinting that other legal firms are not quite as keen to play it straight.

“The idea for Frankology was born following some curly questions put to us by our clients.

“We realised that following FoFA, MySuper and the many other imminent legislative changes facing the industry, many people would be asking similar types of questions and would want straight answers. So straight answers is what we will be giving them.”

Weasel words 

As an example of the confusion amongst senior executives, who really should know better, Wivell Plater cites as example a recent Christmas party where an investment manager insisted to her that his legal advice was such that he could keep paying commissions under FoFA.

When called on to explain, the unnamed manager said: “they’re saying there are structures that’ll make it possible. And besides it’s just a Bill Shorten thing, ASIC won’t have the resources to look at every commission arrangement.”

“Are they giving you a definitive opinion or are they using weasel words like ‘it could be arguable that?’” asked Wivell Plater and, finding that clarity had remained elusive, added a follow-up question to the manager, “so who’s making all the money at the moment then?”

We know that some financial services professionals are trying everything in their power to maintain the status quo in the face of FoFA and, as a result, some in the legal profession will explore every avenue that money can buy.

But how widespread is this practice and does the resulting misinformation set a dangerous precedent further downstream?

Lambs to the slaughter

“It’s pretty simple. Commissions based on volumes or value are conflicted remuneration. It’ll be illegal to pay them. It’ll be illegal to receive them. Structures put in place to avoid the effect of the law will be illegal as well,” said Wivell Plater.

“And make no mistake. ASIC are behind this change all the way and are determined to make it work.”