Grandfathering provisions for conflicted remuneration should be repealed as soon as is reasonably practicable.
The Government agrees to end grandfathering of conflicted remuneration effective from 1 January 2021.
Grandfathered conflicted remuneration can entrench clients in older products even when newer, better and more affordable products are available on the market. Grandfathering has now been in place for over five years, providing industry with sufficient time to transition to the new arrangements. It is therefore now appropriate for grandfathering to end.
The Government is also committed to ensuring that the benefits of removing grandfathering flow to clients. From 1 January 2021, payments of any previously grandfathered conflicted remuneration still in contracts will instead be required to be rebated to applicable clients where the applicable client can reasonably be identified.
Where it is not practicable to rebate the benefit to an individual client because, for example, the grandfathered conflicted remuneration is volume‑based so it is not able to be attributed to any individual client, the Government expects industry to pass these benefits through to clients indirectly (for example, by lowering product fees).
To ensure that the benefits of industry renegotiating current arrangements to remove grandfathered conflicted remuneration ahead of 1 January 2021 flow through to clients, the Government will commission ASIC to monitor and report on the extent to which product issuers are acting to end the grandfathering of conflicted remuneration for the period 1 July 2019 to 1 January 2021 and are passing the benefits to clients, whether through direct rebates or otherwise.
This also responds to the Productivity Commission’s report Superannuation: Assessing Efficiency and Competitiveness which also recommended ending grandfathered trailing commissions.