Posted May 22, 2020
Posted By Meghann Cannon
2020 sees out Stamping Fees
Prepared by Rebecca Exley & Peter Hagias
The ban on conflicted remuneration has now been extended to stamping fees with the ban taking effect 1 July 2020, following the consultation earlier this year. For most of the industry, this may not come as a surprise, but is it poor timing?
The Treasurer’s announcement on 21 May acknowledged that new LICs and LITs had largely ceased since the inception of Covid-19, but the Morrison Government wanted to ensure that the ban was in place ahead of any resumption of capital raising activity. But the global lockdown and ceasing of capital raising has meant that adviser income streams have also been depleted – perhaps significantly.
While the stamping fee is largely marketed as a cash grab, it is usually paid in lieu of due diligence and other costs incurred by advisers in determining whether to recommend the relevant LIC or LIT to their clients. Any recommendations are always subject to the best interest duty and must override any other interest that could pose an actual or potential conflict.
From 1 July, it is expected that the stamping fee will either be passed on to consumers, absorbed by advisers or incorporated into ongoing advice fees, but what the industry really needs at the moment is some certainty around the regulatory road map. There are a number of significant changes delayed and pending, and for advisers who are trying to do the right thing, it is incredibly challenging.
Pre Covid-19, the FPA had publicly supported the removal of “conflicted” stamping fees to ensure that clients receive unconflicted advice that is in their best interests. Everyone agrees that clients’ best interests are paramount, but as Australia emerges from a lockdown and into a new unknown world, is now the ideal time?