ASIC will ask providers “known to pay grandfathered conflicted remuneration” to provide data for reviews into the financial advice industry’s progress towards ending grandfathered commissions.
The regulator revealed it first sent survey notices to “selected entities” on August 21 requiring them to provide data initially for a twelve-month period to 30 June 2019, and thereafter on a quarterly basis.
Responses to the corporate regulator will be provided via web portal, with the data then fed into both qualitative and quantitative reviews ASIC is conducting as part of a broader project aimed at tracking how industry participants are handling the transition to non-conflicted remuneration.
“We expect to deliver our final report from this project to the Treasurer by June 2021 and we also plan to publicly release interim findings next year,” ASIC Chair, James Shipton, said during a keynote address at a Financial Services Council event in Sydney last week.
While the quantitative review will focus on data and form the bulk of the focus, the qualitative review will be sent out to a smaller sample and “involve more detailed engagement and analysis during the review period,” according to ASIC.
The reviews are part of ongoing efforts by ASIC to understand the amount of conflicted revenue sitting on financial advice books, as well as how advisers, licensees and product providers are working together to extricate the payments. In May, ASIC also sent letters to licensees asking them to provide a list of products on which they received grandfathered remuneration.
“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 at the time.
When conflicted remuneration was originally banned for advisers as part of the 2013 Future of Financial Advice reforms, extensive industry lobbying saw the government carve out concessions allowing existing commissions to remain in place.
Shortly after the Hayne royal commission recommended a ban on these quarantined commissions, the government released on February 22nd draft legislation to remove them from 1 January, 2021.
Coredata research from last year showed that 12 per cent of financial advice revenue is derived from grandfathered commissions.
A ban on conflicted remuneration has long been advocated by the Australian Securities and Investments Commission.
