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Commissions and Fees

Paul Carter NULIS (MLC/NAB)

NULIS (MLC/NAB) is just the latest to be questioned in the royal commission.

Michael Hodge QC questioned Paul Carter, NULIS earlier this week about their approach to fees for no service and the MLC polices.

The proceedings found that NULIS kept paying commission to financial advisers by deducting from members’ accounts despite there being no service, because of a concern that the advisers would move their clients to another fund.

Carter suggested that financial advisers cutting the commissions a perceived breach of contract by NULIS, even if the contract with the wider MLC.

When asked why he thought financial advisers would do this despite the best interest duty, Carter said that nit being financial adviser he was not a position to answer.

Financial advice has come under major scrutiny and this has led to the dual regulator model between the Australian Securities and Investment Commission and the Financial Adviser Standards and Ethics Authority (FASEA).

When asked if there was a risk assessment one on what would happen if financial advisers did move their clients to another fund, Carter said that he could not recall.

A fee or commission?

Carter suggested that the fees were commissions not for specific advice but rather payment for access to advice.

The planned service fee which affected members was not properly explained in MLC’s reference document and Carter acknowledged that the language in the document ‘could have been enhanced’.

He also acknowledged that there could have been some clarity around the member’s ability to call MLC and switch it off.

When a risk officer did ask questions about employment fees that were deducted from accounts the answer is that matter had yet to be dealt with.

At the time of writing this, the proceeding for 6 August has just adjourned and Paul Carter will be questioned further and 9:30 am in the next morning.

This does raise concerns about ethical business practices.

The semantics games around commissions and fees raise a question mark over the challenge that industry has raised over ASX Governance code when they suggest that it is too distracting or too prescriptive.

Naomi Burley, Managing Director, said that if a business cannot be trusted to act in the spirit of the law, there will be more prescriptive regulation.

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