Brad Fox – CEO – AFA
The Association of Financial Advisers (AFA) is cautious about the implications of Regulatory Guidance on Conflicted Remuneration as issued by ASIC late on Monday night, particularly when viewed in the context of the draft regulation that was issued by Treasury on the same day. There are significant implications that flow from both documents.
“This is a very complex piece of guidance and it will take a little time to fully analyse and comprehend the implications,” said AFA CEO Brad Fox. “However, following our initial read of the guidelines, we still harbour significant concerns about the ability of the financial advice industry to retain appropriate incentive schemes to promote both good advice and adviser productivity .”
Mr Fox said the AFA anticipates that there will need to be significant changes to remuneration structures across the industry.
“We have seen some positive changes through the release of this document, including greater clarity on equity arrangements and the passing on of benefits from clients to advisers,” he said. “However, there remain a number of areas of uncertainty, where it will be difficult for the industry to develop firm implementation plans.
“We look forward to further consultation with ASIC, to better understand the full implications of the regulatory guide and will continue to support our members and Licensee partners to prepare for the commencement of FoFA.”
In terms of the draft regulations on grandfathering issued by Treasury, the AFA also notes the further complexity that will arise through the introduction of new tighter arrangements that will not come into effect until 1 July 2014. The effect of this is to close off the grandfathering of volume bonuses to new clients with effect from 1 July 2014. “A change this big, so late in the process is unsettling,” said Mr Fox.
“It will take the industry some time to work through these issues and understand the broad implications on both the obligations and the FoFA project activity,” Mr Fox said. “Our concern is that this will drive further costs and uncertainty, which will be a key focus of our upcoming AFA FoFA Working Group.”