Why join the challenge?
The ARC CHALLENGE FUND is all about the Financial Advice Community coming together and taking a stand against the unfair treatment Financial Advisers have endured over the past decade.
The primary objective of ARC is to mount a Constitutional legal challenge in the High Court over the validity of the Federal Government’s proposed legislation expected to be introduced into Federal Parliament to ban Grandfathered Revenue (GR) shortly. ARC will administer the Fund and instruct Legal Counsel to commence the High Court challenge when the proposed legislation becomes law.
ARC is an independent entity and the ultimate ARC objective of the Fund is to marshall the funds necessary to mount a successful case against the proposed legislation banning GR, and to lobby for a change of direction by the Government on GR.
ARC’s other objectives are to educate both Politicians and consumers alike on the critical role Financial Advisers play in society and to address deficiencies in LIF and FASEA.
How did it come to this?
Nothing in the 2013 legislation, or the circumstances which gave rise to the exemption granted to Grandfathered Revenue, has changed since Mr Shorten’s explanation.
In 2011, the then Financial Services Minister, Bill Shorten (as reported in Hansard) when explaining why Grandfathered Revenue was to be exempted from the banning of conflicted remuneration to Parliament, was advised by Treasury that product revenue trailing commissions, agreed to be paid under validly made contracts and arrangements between the Adviser and client, and Adviser and Product Issuer, could not be terminated unless it was on“just terms”. A banning order would have violated Section 51(xxxvi) of the Australian Constitution; in other words, unless a person is fairly compensated for such termination, then the termination would be in breach of Section 51(xxxiv).
So, the current Government's proposal to ban GR appears to be at odds with the advice received from Treasury by Mr Shorten. Nothing in the 2013 legislation, or the circumstances which gave rise to the exemption granted to Grandfathered Revenue, has changed since Mr Shorten’s explanation to warrant a banning of GR.
Why contribute to the fund?
There is only one chance in the HIGH COURT to challenge any matter. The Court does not allow appeals, or for another party introducing the same issue – we must act now or the opportunity will be forever lost.
A successful ARC challenge will send a clear message to the legislaters that the Advice Community will now stand up as a consolidated force to defend itself against injustice, this is particularly relevant with the re-elected Coalition Government in Canberra and the fallout from the Haynes Royal Commission.
IT IS TIME for the Advice community to stand up. If it does not, other draconian measures will no doubt be forced upon us in the future.
We must also educate both Politicians and consumers on the invaluable role Advisers play in the finance services industry and in society generally.
ARC’s objective is to raise $3 million to cover all contingencies for such a challenge. Such an amount will allow us to reach the stated objectives and avoid the need to seek more funding at some point in the process.
What will happen to my contribution?
- All funds contributed will be held in escrow by Melbourne Securities Group (MSC), to ensure the funds are used appropriately.
- MSC’s role is to ensure that all contributions made to ARC are in secure hands.
- ARC’s role will be to provide instructions to Legal Counsel/MSC and other relevant parties and to administer the payments for costs associated with the strategy.
- No guarantees are, or can be, given as to the success or otherwise of the lobbying campaign or the High Court Challenge, but to do nothing would be the wrong option, both now and in the future.
- We encourage you to join the ‘fight’ and you will be doing so in the knowledge that your contribution will assist the cause, and show the politicians and regulators that the Financial Advice Community has united against the constant assaults directed at it.
Why the fight?
The only winners from the banning of Grandfathered Revenue are the Institutions, which will have the option to keep the revenue for themselves.
As we know, Grandfathered Revenue is not derived from clients’ accounts. It is sourced from the management fee a Product Issuer charges a consumer to manage their money.
Unfortunately, some sections of the Institutional lobby have ‘spun’ the notion that this revenue is sourced from the consumers’ account, and thereby eroding the return on their investments. This is wrong and serves to unfairly damage Advisers' reputations.
Who are the Winners and Losers?
The only winners from the banning of Grandfathered Revenue are the Institutions, which will have the option to keep the revenue for themselves. There is no legal obligation on a Product Issuer to rebate to the client the revenue forgone.
GR is not a 'gift' it is revenue used by Advisers to subsidise and amortise over time the administrative costs of providing comprehensive services to clients and fund the operation of their practice.
The only losers, ultimately, will be consumers.