An ASIC spokesperson has confirmed that letters were recently sent out to several licensees asking them to provide a list of products on which they received grandfathered remuneration.
In a statement provided to Professional Planner, the Australian Securities and Investments Commission said the work had already begun to understand how much conflicted revenue is on the books.
“ASIC has been directed by the Federal Government to investigate and monitor arrangements by industry to end grandfathered remuneration in the period 1 July, 2019 to 1 January, 2021. We have commenced work in preparation for this,” a spokesperson said.
Industry sources confirmed the letters have been received by licensees, who intend to comply with the request.
After the Hayne royal commission recommended a ban on the conflicted remuneration that was quarantined as part of the 2013 Future of Financial Advice reforms, the government released on February 22nd draft legislation to remove those considerations from 1 January, 2021.
The amendment would effectively give licensees and advisers 20 months to cut grandfathered commissions.
As part of the proposed ban, the Treasury Laws Amendment Bill 2019 also enabled further changes to ensure “the pass through to customers of the benefits of any previously grandfathered conflicted remuneration remaining in contracts after 1 January 2021”.
By getting a broad cross-section of the levels of grandfathered remuneration at licensed advisory firms, ASIC will be more able to ensure the benefits are realised by clients.
Since the Treasury announcement there has been conjecture about exactly how grandfathered commissions would be extricated from balance sheets of advice firms. Who would be responsible for driving the exchange – advisers, licensees, product providers or the government – has also been a matter of debate.
ASIC’s engagement with licensees is the first tangible move towards the ban since the draft amendment was announced. It is understood the regulator is not necessarily asking licensees how long it will take them to unwind the commissions at this point, or how they intend to do so, but simply how much exists.
Coredata research shows that 12 per cent of financial advice revenue is derived from grandfathered commissions.
An online poll run by Professional Planner last month revealed that the majority of the advice industry believe the ban should happen on or no later than the proposed date.