Ex financial planner and Member for Forde, Bert van Manen (image: Jess-Lue)

ASIC has refuted suggestions it had no idea the impact its recommendation to the Hayne royal commission for a ban on grandfathered commissions would have on advisers, with executive director of wealth management Joanna Bird saying the decision was “not based on a vacuum of data”.

The corporate regulator was grilled by Coalition MP Bert van Manen as part of the Parliamentary Joint Committee’s inquiry into ASIC’s oversight on Friday.

Van Manen said it is “troubling” that last month ASIC announced it was conducting research into the transition away from legacy commissions, more than a year after it told Hayne grandfathering of commissions should cease “as soon as reasonably practicable”.

“Surely ASIC should have done this work prior to making the submission?” van Manen asked.

“It’s quite clear… that you actually, at [the time of making the recommendation], appear to have had no idea of the impact of your comments in your submission,” he added.

The MP accused ASIC of not doing the work to understand the level of grandfathered commissions in the industry before it made the call to ban them, a charge which was refuted by Bird.

“We had done earlier work, which wasn’t as comprehensive,” she said, before adding that ASIC had seen circumstances where they believed the legacy commissions were having a “negative impact”.

It’s not that ASIC hadn’t researched the matter, Bird argued, but that they were subsequently asked to do it “in an extremely comprehensive manner” by Treasury.

“The statements that we made in relation to the royal commission were not based on a vacuum of data; it’s just that the data we’re gathering now is comprehensive,” Bird explained.

Van Manen himself is a former financial planner. The Queensland practice he co-founded with ex-partner Andrew Cosgrove, Vangrove Financial Planning, was placed into administration on 10 May 2012. Cosgrove was subsequently investigated by ASIC and pleaded guilty to three charges of breaching his director’s duties.

‘Flexibility for the consequences’

Hayne mirrored the view of ASIC in his royal commission final report, even using the same language when he recommended that grandfathering provisions should be repealed “as soon as is reasonably practicable”. The directive was then carried out by the Coalition Government, which passed legislation last week to ban grandfathered commissions from 1 January 2021.

While there has been considerable pushback on the ban from some advisers – particularly those with a lot of legacy commissions still on their books – van Manen said he didn’t actually take issue with the ban itself.

What is “disappointing and frustrating”, he said, is that the “totality of the risk and the consequence… has not been fully thought through.”

Bird replied that the situation was “complex”, which prompted van Manen to question why the regulator didn’t flag those complexities as a risk to Hayne. “My point is that your response to the royal commission was not fulsome in identifying the issues that will be raised as a result of pursuing this avenue,” he said.

At this point in the PJC hearing ASIC chair James Shipton interjected to explain that the paragraph in the submission recommending the ban was drafted “with an open mind” to allow for “flexibility for the consequences”.

“Whilst we did not elaborate on some of the issues that you’re raising now, we were certainly mindful – hence the careful language used – that there are complexities,” Shipton explained. “That’s why right now… we are actively engaged with the industry and with the Treasury to try and work those issues through.”

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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