Preview
Archived Posts Lists

Australian Regulatory Compliance Review
Australian Technology and IP Business
Credit Union and Mutual Law
National Consumer Credit Reform
Personal Property Securities Australia
Longview Business Insights
Australian Private Health Insurers
Wills, Trusts, Super
Mutuals Resource Centre

Resources

Commonwealth legislation
Corporate Governance
Not-for-Profit links
Regulator Links

July 17, 2013

What financial adviser employee benefits are prohibited?

If your business provides financial products or services to retail clients the FOFA conflicted remuneration changes that commenced on 1 July 2013 prohibit giving certain benefits to employees who give advice: section 963J of the Corporations Act 2001.

The test, especially for volume-based performance benefits linked to sales, is whether the benefits could reasonably be expected to influence the advice given by the employee or the choice of financial product recommended: section 963A.

But a bonus which is paid in recognition of high levels of customer satisfaction, an increase in customer referrals, an outstanding compliance rating and developing referral networks with other professional services firms is unlikely to be conflicted remuneration because it would not reasonably be expected to influence the financial product advice given by the adviser.

The Appendix to RG246 lists performance benefits that would otherwise be prohibited which are excluded from the conflicted remuneration provisions. The list includes benefits for advice for basic banking and general insurance products and consumer credit insurance.

Some conflicted remuneration workplace arrangements are grandfathered by section 1528 and the Regulations depending on the type of agreement (eg an enterprise agreement) that provides the benefits and whether the agreement was made before 1 July 2013.

Care should be taken in relation to entering into new enterprise agreements which affect employees who are currently employed under pre 1 July 2013 EAs or under non-EA arrangements and who are paid what may be conflicted remuneration, as what is done may affect how grandfathering applies in relation to those employees.

Langes can advise you on these arrangements.

Print This Post Print This Post

Posted 17th July 2013 by David Jacobson in Corporations Act, Financial Services, Future of Financial Advice Reforms