Conflicted Remuneration & FOFA Bans

Understanding what remuneration is prohibited under the FOFA reforms

What is Conflicted Remuneration?

Conflicted remuneration refers to monetary and non-monetary benefits that could influence financial advice. The FOFA reforms banned or restricted several forms of remuneration to ensure advice is in the client best interests rather than the adviser interests.

Commission Bans

Volume-based commissions and shelf-space fees are prohibited under FOFA. Advisers cannot receive commissions or rebates that depend on the volume of products recommended. This includes conflicted remuneration paid by product issuers to advisers or licensee groups.

Soft-Dollar Benefits

Soft-dollar benefits such as travel, entertainment, or educational events provided by product issuers are restricted under FOFA. Benefits above a prescribed value must be disclosed, and certain benefits are banned outright.

Disclosure Requirements

All fees, commissions, and benefits must be clearly disclosed in the Statement of Advice. AdviserCheck specifically checks for complete fee and conflict disclosure under RG 175.123. Ongoing fee arrangements must be disclosed and renewed annually.

What Counts as Conflicted Remuneration

Conflicted remuneration is defined under the Corporations Act as any benefit (monetary or non-monetary) that could reasonably be expected to influence the financial product recommendations made by an adviser or their licensee. This includes: upfront and trailing commissions, volume bonuses based on product sales targets, soft-dollar benefits such as overseas trips, conference fees, or entertainment provided by product manufacturers, and any other benefit that creates a conflict between the adviser's interests and yours.

The FOFA reforms, effective from 1 July 2013, banned most forms of conflicted remuneration. The ban was designed to remove the inherent conflict of interest that existed when advisers received higher commissions for recommending certain products. Before the ban, it was common for advisers to recommend products that paid the highest commission rather than the most suitable product for the client. The ban fundamentally changed the financial advice industry.

Grandfathered Commissions and Transitional Arrangements

When FOFA was introduced, existing commission arrangements (called "grandfathered commissions") were allowed to continue. These were commissions on products purchased before 1 July 2013 that continued to be paid to advisers. However, the Delivering Better Financial Outcomes (DBFO) reforms, effective from 1 July 2024, ended all grandfathered commission arrangements. From that date, no ongoing commissions can be paid on legacy products.

Life insurance commissions remain an exception to the conflicted remuneration ban. Advisers can still receive commissions for life insurance products (including life, TPD, trauma, and income protection). However, from 10 July 2025, life insurance commissions are capped at 60% of the premium in the first year and 20% in subsequent years, and the adviser must obtain your informed consent before receiving the commission.

How to Check If Your Adviser Has Conflicts

Your adviser's Financial Services Guide (FSG) must disclose how they are paid and whether they receive any commissions or benefits from product providers. Your SOA must also disclose any commissions or benefits related to the specific recommendations. If the disclosure is vague or missing, ask for clarification in writing before proceeding.

You can also check your adviser's entry on the ASIC Financial Advisers Register, which shows their licensee, the services they can provide, and any disciplinary history. If you suspect your adviser is receiving undisclosed benefits, you can report your concerns to ASIC through its online reporting portal.

Frequently Asked Questions

Are all commissions banned under the conflicted remuneration rules?
No. Life insurance commissions remain permitted (with caps and consent requirements from July 2025). General insurance commissions, certain platform fees structured as commissions, and benefits that are not reasonably expected to influence recommendations may also be permitted.

What are soft-dollar benefits?
Soft-dollar benefits are non-monetary benefits provided to advisers by product manufacturers, such as conference tickets, travel, hospitality, or IT support. These are generally banned unless they are genuine educational benefits or minor benefits below $300 per year.

What should I do if my adviser does not disclose their commissions?
Request a written disclosure of all commissions and benefits the adviser and their licensee receive in relation to the recommendations in your SOA. If the adviser refuses or provides an inadequate response, consider lodging a complaint with AFCA or reporting the matter to ASIC.

How do the new life insurance commission caps work?
From 10 July 2025, life insurance commissions are capped at 60% of the first year's premium and 20% of ongoing premiums. The adviser must obtain your informed consent (in writing) before receiving the commission, and the consent must be renewed every 12 months for ongoing commissions.

Regulatory Timeline: 2012 to Today

Each reform below changed what your adviser must do and disclose. Knowing the timeline helps you judge how current your document's obligations are.

Date	Reform	Impact on Consumers
July 2012	FOFA enacted	Best interests duty (s961B), ban on conflicted remuneration, opt-in for ongoing fees
July 2013	FOFA mandatory	Full compliance required — advisers must act in your best interests
July 2016	Accountants' exemption repealed	Accountants need AFSL to give SMSF advice, increasing consumer protection
2018-2023	Royal Commission + response	FEAR Act (2019) — higher penalties, breach reporting, enforceable director duties
Dec 2022	QAR Final Report	22 recommendations including simplified SOAs, new adviser class, streamlined best interests duty
July 2024	DBFO Tranche 1	FSG website disclosure option, conflicted remuneration clarification
Jan 2025	DBFO changes commence	Fee Disclosure Statements removed, streamlined ongoing fee consents, legal clarity for super advice fee deductions
Mar 2025	DBFO Tranche 2 draft	SOA rationalisation, collective charging for super, super fund targeted prompts. Best interests duty modernisation and new adviser class still in development.

Sourced from ASIC, Treasury DBFO documentation, FAAA and APESB publications.