‘Almost zero chance’ of bringing back LIC broker fees

Treasury’s separate Quality of Advice Review, chaired by Allens partner Michelle Levy and due to report back to government by December 16, is set to examine conflicted remuneration paid to advisers, including IPO stamping fees and life insurance commissions.

Asked to respond to the suggestion, put forward by both the ASA and SAIAA, that the ban disadvantaged retail investors by blocking them from a risk-appropriate investment, the minister was skeptical.

“Are they seriously saying the only way they can invest is if an adviser receives a commission? If somebody really wants to get access to listed investment company or trust, you can get it. ”

Mr Jones was among the most vocal supporters of closing the “loophole” which allowed stamping fees to be paid on LICs and LITs, even though similarly ASX-listed exchange traded funds cannot pay a commission to advisers under the law.

As Opposition financial services spokesman he wrote to Treasury in January 2020 voicing “deep concern” about the business model being adopted by some brokers and advisers recommending LICs/LITs.

“Following the banking royal commission, we have a much clearer picture of how conflicted remuneration – such as stamping fees – can lead to bad outcomes for ordinary investors,” he wrote at the time.

The Morrison government’s ban on stamping fees was controversial in that it only applied to LICs and LITs but not ordinary company or real estate investment trust IPOs. Former treasurer Josh Frydenberg at the time said these assets would continue to operate under an exemption because they were linked to the “real economy”.

Asked whether the government would consider extending the ban to REITs or company listings, Mr Jones said: “It’s not on my list at the moment.”

Mr Frydenberg instigated a review of that exemption after The Australian Financial Review revealed in January 2020 that the Morrison government ignored warnings from senior regulators that allowing stamping fees to be paid on LIC and LIT IPOs was a “loophole” luring mum-and-dad investors into poor-performing funds.

Treasury’s stamping fee consultation closed on Sunday but it has not yet published any submissions.

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