Hi, the Board is very pleased to inform you that we have found a better than even chance to defend any attempt by Federal Government to ban Grandfathered Revenue [GR].
Over the past week we have appointed an International Law firm and a well known Constitutional QC to represent us in the High Court.
As you no doubt know, GR has become a political ‘football’ in recent times. Due to the confusion over the origins of GR [thanks to consumer groups and the Institutional Lobby], it has been portrayed as coming directly out of clients accounts and conveniently considered a ‘fee for no service’ payment – which is trash. As a consequence, both Shorten and Morrison are preparing Private Member Bills to try and push it through before the May Election to grasp some political kudos – unfortunately at our and the consumers expense.
Ironically, it has been the past statements in Parliament by then Minister Bill Shorten in 2011 [see attached Hansard] that shines a light on our opportunity. Below is a statement which has been sanctioned by our Legal team outlining our position for your consideration. Basically, it is about contract law and they cannot break it.
This will appear in press over the next week or so. We encourage you to send this information onto any other interested party, it will be a minimum of a $1 million spend.
This is the opportunity for the Advice Community to make a significant stand against injustice but we need your help to fund the action.
More information shortly.
The AIOFP has always been committed to further the interests of consumers and financial advisors since 1998, we have never wavered from this objective.
Our focus is now on the historical commission based compensation arrangements [Revenue] issue AKA Grandfathered revenue.
Major institutions and their affiliated parties have successfully and unfairly portrayed this Revenue as a ‘fee for no service’ payment derived from a client’s personal account. This is incorrect, the Revenue is paid by the Institutions to advisers from the profits they make on the funds management/administration fee where the client’s money resides, it is NOT an additional cost to the client.
This Revenue helps subsidise the cost of operating a practice allowing Advisers to reduce the fee charged to consumers.
The only outcome if this legislation is successful is the Institutions will retain the revenue, the advisers will not get paid and the ongoing advice cost will be levied at consumers – a very poor outcome for all concerned, except the financial institutions.
Furthermore, the AIOFP is concerned that the proposed changes may NOT be constitutionally valid. Previously, as part of the Future of Financial Advice (FOFA) debate, consideration was given to banning commission structures. Current Opposition Leader Mr Shorten, in his capacity as then Assistant Treasurer/Minister for Financial Services noted in the Corporations Amendment (Future of Financial Advice see attached) Bill 2011 Explanatory Memorandum (in response to proposals to ban trailing commissions) that:
“the proposal to ban particular remuneration structures can only operate prospectively, due to constitutional restrictions concerning acquisition of property.”
Since 2011, the constitutional restrictions on the acquisition of property (other than on just terms) have not changed. Further, the FOFA reforms explicitly preserved pre-existing remuneration structures.
Accordingly, the AIOFP is taking legal advice in relation to a potential challenge to the validity of proposed amendments to remuneration structures without any compensation to members given the radical change in the Commonwealth’s position and its stated legislative intention.
To challenge this injustice in the High Court of Australia will be around $1 million if we are successful and $1.5m million if we are unsuccessful.
We will be seeking to levy each affected Adviser to assist with taking on the Federal Government and fight for our and our clients rights.
This action will send a clear message to Canberra that the Advice Community has had enough of unfair treatment and we are prepared to fight against injustice.
More information shortly.