BT Wrap has called on the federal government to review its position on volume bonuses after growing concern the fee model has been incorrectly lumped in with the government’s fee and commission crackdown.
BT Wrap head Chris Freeman said the BT Financial Group-owned business unit was in discussions with Treasury over concerns dealer groups were examining the potential undertaking of becoming their own responsible entity or trustee due to a new regulation proposed by the government’s Future of Financial Advice reforms.
“What we’re concerned about in this regulatory change is that the way that we collect fees is we collect the money off the investor and that’s part of our wrap proposition and we make the disbursements to pay the adviser, the fund manager gets paid and we get paid,” Freeman said.
“But then we pay back the dealer group their margin. So it’s their money we’re collecting and paying them back.
“What we’re worried about in all the regulatory change is that is seen as a volume bonus and it’s not a volume bonus, it’s just an accounting way of us collecting money off the investor and paying it back.”
He said representatives from BT Wrap had approached Treasury to ask it to rethink its draft legislation regarding the inclusion of volume bonuses.
“We’ve gone back to Treasury and we’ve said to them in their drafting legislation they should think about that [volume bonuses] and they should think about how to give us a carve out in terms of the fact that it’s not a volume bonus, it’s a business-to-business relationship and an accounting issue,” he said.
He said one of the issues BT Wrap had regarding the proposed new regulation is that 95 per cent of its book was white labelled or private label badges, and if dealer groups chose to change their structure in regards to products and services, the firm might be forced to overhaul its relationships.
If new regulation pushed dealer groups down the path of becoming responsible entities or trustees, it would create further issues, he said.
