So any commission based payments that were in place prior to 1 July are not banned and what’s more, do not need to be included in the new annual “Fee Disclosure Statement” (FDS) requirement. In other words, the client keeps paying but is kept in the dark. This literally applies to millions of dollars of annual commission payments coming out of client investments and paid to advisers who originally recommended the product.

The non-disclosure issue is bad enough but what is even worse is that advisers receiving these commission payments will be reluctant to recommend any investment changes to the client, regardless if it is in the client’s interest, because as soon as the commission paying investment is changed, the “grandfathering” ceases and the adviser has to (a) find an alternative way of charging and (b) justify the cost.

This “grandfathering” provision is just plain wrong and certainly not in the client’s best interests. The government has introduced some excellent initiatives in an attempt to eliminate conflicts of interest and enable consumers to clearly identify costs and service provided. However, this “grandfathering” provision is a compromise to the industry and against the spirit of the legislation, not to mention delivering fairness to the consumer.