The corporate regulator has shed some light on the finer details of its review into the phasing out of grandfathered commissions, which will include estimates on the quantum of funds subject to conflicted remuneration and a view on alternative remuneration structures for advisers.
The information was given by ASIC in a response to questions taken on notice at the PJC enquiry in September last year, and details both the qualitative and quantitative measures being taken to measure the rollback’s progress – as well as those not being undertaken.
There are seven data periods that will go into the review, ASIC confirmed, with the first being for the 12 months up to June 30, 2019. The other six periods – which licensees are in the middle of providing data for – will be data for successive 3-month terms up to December 31, 2020.
ASIC has been asking “payers” of grandfathered commissions for totals, the response stated, and from this will approximate how much has been invested into commission-paying products.
The review will obtain data on how many providers and products pay commissions, which licensees are collecting them, and the client accounts involved.
In response to a question about how many financial advisers are likely to be impacted by the ban, ASIC said that is was “not obtaining data about the number of individual financial advisers that dealer groups/advice licensees pass grandfathered conflicted remuneration on to”.
Similarly, the regulator said it would not touch on other areas of product subsidisation or conflicted remuneration.
“ASIC is not obtaining data about annual payments of volume-based shelf-space or asset-based fees on borrowed amount[s] as these are outside the scope of the Direction,” the submission stated.
The “Direction” ASIC refers to is the original request from Treasury on February 21, 2019 to investigate the extent both payers and receivers of grandfathered commissions are changing their arrangement and passing the benefits onto clients. The government has committed to ending the practice by January 1, 2021 and wants to be kept abreast of any impediments to the phase-out.
The quantitative part of the review will include life insurance and annuity product providers, ASIC revealed, and will keep an eye on any blockages to client rebates.
ASIC will also “seek to understand alternative remuneration structures”, as well as any adverse client outcomes that may eventuate such as capital gains tax implications or Centrelink allowance reversions.
“ASIC will provide a final report to the Treasurer by no later than 30 June 2021, outlining the findings of the investigation,” the response stated, noting that interim reports will be prepared during the review period.