Carve-outs for SMSFs under fire post Royal Commission
Policymakers are being pushed to focus their attention on carve outs received by SMSFs for the conflict of interest aspect of the FOFA legislation, which it argues creates “an unlevel playing field”.
In light of the concerns highlighted by the Royal Commission and ASIC in relation to grandfathered commissions, the Independently Owned Financial Advisers in Australia have told the government it should first focus on the carve-outs for vertically integrated businesses and SMSF structures under the Future of Advice Reforms (FOFA).
“The political lobbying around FOFA totally compromised the objectives of the legislation where vertical integration and SMSF structure effectively received carve-out from the conflicts of interest aspect of the legislation,” Mr Johnston said.
“This created a massive unlevel playing field where institutionally aligned and SMSF advisers could receive cross subsidisation benefits from their activities whilst independently owned practices who operated their own AFSL and did not deal in SMSFs, could not.”
Mr Johnston added that while the current grandfathering arrangements are not perfect, “we don’t have a perfect market” either, and that removing grandfathered commissions may result in detrimental outcomes to some clients.
“Trying to unravel some client product structures will be a distinct disadvantage to consumers, rendering a blanket ban impractical and not in the best interests of some consumers,” he said.
“Putting aside contractual obligations around grandfathering arrangements, once these two ‘anomalies’ of vertical integration and SMSFs are addressed then, and only then, should grandfathered revenue be addressed.”
Responding to the same questions, the AFA’s general manager of policy and professionalism, Phil Anderson, said it “has previously made its position on grandfathering public”, noting that the majority of the most recent round of hearings focused on corporate superannuation.
“We have until 25 September to respond to the questions raised at the recent hearings and will respond accordingly,” he said.