Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 342

Just for Josh: Survey on attitudes to LIC fees

The Federal Treasurer, Josh Frydenberg, has announced a brief public consultation into whether financial advisers should receive 'stamping fees' for distributing listed vehicles to their clients. The results of this Firstlinks survey will be provided to Treasury as input to its decision. Please take a moment to share your views and we will publish the results next week.

[Note: This survey is now closed]

A changing landscape for listed entities

After $4 billion of issuance in Listed Investment Trusts (LITs) and Listed Investment Companies (LICs) in each of the last two years, the regulatory landscape is about to change. Although two fixed income LITs are currently raising money under the old rules allowing stamping fees to be paid to financial advisers, it is likely that the Federal Treasurer will ban the practice in future and bring listed funds and trusts in line with unlisted vehicles under FoFA.

For those who require more background, we have published several articles on the subject, including:

Advisers and investors in the dark on LITs and LICs, a detailed background paper explaining the current regulations and why they are unsustainable.

Authorities reveal disquiet over LIC fees, following the FOI revelation that ASIC argued the payments should be banned.

1 January is moment of truth for the wealth industry, a financial adviser argues good advice must be free of conflicts.

Three overlooked points on the LIC/LIT fee battle, offers the same conclusions we expect Treasury to reach.

Here is Josh Frydenberg's announcement:

"The Morrison Government is today announcing that Treasury will undertake a four week targeted public consultation process on the merits of the current stamping fee exemption in relation to listed investment entities.

Stamping fees are an upfront one-off commission paid to financial services licensees for their role in capital raisings associated with the initial public offerings of shares.

Public consultation will allow the Government to make an informed decision on whether to retain, remove or modify the stamping fee exemption in order to ensure that the interests of investors are protected and capital markets remain efficient and globally competitive."

In addition, the CEO of the Financial Planning Authority (FPA), Dante De Gori, responded with support to ban payments: 

“At this point in Australia, all other forms of product-directed payments that a financial adviser receives from clients have been banned, leaving most financial planners only receiving fee-for-service payments. The FPA supports the government’s efforts to improve the quality of financial advice that all Australians receive."

Let us know your opinion including comments and we will ensure the survey is presented to Treasury. The survey is only a few questions and no identities will be revealed.

Either complete the survey embedded below, or use this web link.

 



 

27 Comments
Adviser
January 29, 2020

I have not see in ANY press article, the amount of time and work that Financial Planners put it in doing due diligence on an IPO, preparing allocations, recommending it to clients and arranging settlement. In addition to this, when bidding for "firm stock" the Adviser might end up having to take any shortfall than cant be filled. If there is ONE factual message that could be passed on to Treasury it is this. I support a cap in stamping fees of 0.50% which is fair and reasonable.

Adviser
January 29, 2020

Generally I only recommend traditional LICs (AFI,ARG, BKI, WLE etc) with low mgt fees. I am disinterest in "new" LICs/LITs. I do business in Rollover of Bank Hybrids for which stamping fees apply. Usually I have to spend considerable time discussing these situations with clients, and arranging documentation. If I were not "proactive", my clients may not take action.

Adviser
January 29, 2020

While the wording of the code of ethics is really poor, the worked examples make it clear that the fees can be received. Where they can not be received is where they cause a change in the adviser's behaviour e.g. when the adviser chases stamping fees because he needs to pay his kid's school fees. I don't understand how there are still any questions around this.

Client
January 29, 2020

Happy to pay fee for service. Will never use adviser I know is getting a commission! (by what ever name!!!)

Non adviser
January 29, 2020

No problem with an advisor receiving a fee from the product provider provided that the advisor provides a written statement comparing the product to at least three other similar products and gives a reasonable rationale as to why the advisor is recommending this product over the other three products. In the same comparison the advisor must indicate the fee to which they would obtain from the recommended provided plus the fees if any that they would be entitled to had they recommended any of the other three products. My quick read of the legislation suggests that advisors who represent the product as employees are exempt from disclosing commissions. Where an advisor publicly advertises that they market a particular set of products prior to any interaction with clients and reports this annually (perhaps to ASIC), I don't see a need for them to disclose commissions. This is the situation that applies in real estate where the agent makes it publicly clear prior to interaction with possible clients (i.e. buyers) the product (real estate) that they are selling. There is no obligation for them to disclose to the buyer the commission that they will receive from the sale of the property. It should be noted that they are guidelines for setting of commissions and buyers and sellers can gain a sense of what the real estate agent will receive.

Client
January 29, 2020

Some advisers do no work and just recommend based on payment but others do a lot of research and evaluation work prior to recommending. Better education of investors and a capacity to recognise return on investment will make investors more discerning.

Client
January 29, 2020

Many other industries adopt payment methods and incentives by companies that they are selling their product. Many of these their client relies on the representatives advice. So if brokers and financial advisers make it known to their clients I cannot see the problem after all most businesses are underwritten in some of its major suppliers which smooths out the bumps in their finances. If financial advisers rely solely on a fee when someone knocks on their door the service will cease to exist.

Client
January 29, 2020

As long as fees and commissions are explicit and known to clients, and are taken into account in the justification of the investment recommendation, then I do not see an issue.

Client
January 29, 2020

We have first hand experience of this. Our FA said the commission they got was to a separate part of their business therefore 1. No conflict, and 2. They did not have to rebate it to us as per our agreement. The LIC tanked on opening and our FA told us to get out when it was 15% down. I have lost most of my faith in them as FA’s.

Non adviser
January 29, 2020

LICs are not different to any other company..if BHP pays fees for capital raising why shouldn't AFIC or Argo. Merely because a company(LIC) invests in a group of businesses or a single business line (ordinary listed company) should not alter the rules for capital raising ie responsibility of Directors. The criticism is an artificial distinction driven at least in part from fund managers wanting to stop other fund managers getting funds listed on the ASX. The poor performance of some LICs/LITs is a different issue which is the same as the poor performance of other investment classes eg mining shares, when supply runs hard. Existing Corporations Law requirements can deal with any illegalities. A possible area of useful review is in relation to disclosure of and assessment of market values of unlisted and particularly illiquid securities held by LITs. LICs holding liquid equities and having regular reporting of accurate market asset values are not a market problem irrespective of whether they are internally or externally managed.

Client
January 29, 2020

I think stock brokers are a bit different, we know they are selling product, and I suppose those of us who use them are dare I say it, a little more sophisticate? Just a little!!

Client
January 29, 2020

Complicated issue. Probably should if the broker is providing advice to a client about how to construct an equities portfolio. In that sense the broker is acting as a financial advisor rather than as a provider of stock broking services and products to enable clients to access the Stock Market

Client
January 29, 2020

I have some sympathy for commissioned products with full disclosure There is a danger that investors will revolt against necessarily expensive advice.

Adviser
January 29, 2020

Although I don't and wouldn't accept stamping fees if other advisers do and agree with their clients that is how they are to be remunerated and obviously still act in best interests of clients then I don't have an issue.

Client
January 29, 2020

The problem seems overblown to me. It only applies to new issues and floats, so why is the media demonising all LIC's. Brokers have always got a fee for new floats, so would they no longer be allowed to suggest new floats to clients. How else are clients going to know the floats are available.

Client
January 29, 2020

Advisers should charge a fixed fee for advice based on time spent, not a percentage of FUM.

Client
January 30, 2020

It is quite clearly a conflict of interest and various reports on this have shown the link conclusively between commissions and how they have affected a planners advice to their clients.

Client
January 30, 2020

commissions of any sort are a reward for a service performed so by definition it's hard to see how the broker can avoid being conflicted selling a product to a client whilst getting a payment from a third party. There are enough problems with brokers getting paid in kind already without adding further fuel to the fire.

Adviser
January 30, 2020

As long as they are disclosed I dont see any issue in receiving these type of fees. I just dont agree with different rules for Brokers.

Client
January 30, 2020

clients will never pay a fee for advice enough to make advice a viable business. If the stamping fee was a fixed amount for all securities there would be no conflict of interest.

Client
January 30, 2020

Fees should be based similarly to other professionals such as accountants and solicitors - nominally on a time basis and hourly rate.

Client
January 30, 2020

How can there be any debate whether this is conflicted. A man can not have two masters.

Client
January 30, 2020

Get real and manage these issues, the banks have demonstrated that the financial operators cannot be trusted, why are we still going through this nonsense.

Client
January 30, 2020

Stamping fees ultimately lead to lower returns for clients and is often not obvious to them due to a lack of transparency.

Adviser
February 02, 2020

We rebate all stamping fees and any other commissions/rebates to clients accounts. You can even get 0.20% from some term deposit providers, just crazy. Keep it simple, clients should be the only ones paying for the advice, not the product providers to be put higher up on Advisor radars.

Phil
February 05, 2020

I personally think the Hybrids are the bigger problem. I've seen 500K lots of these sold to 'sophisticated' investors as a cash like product by the private banks etc.

 

Leave a Comment:

RELATED ARTICLES

LIC/LIT stamping fees survey results

Three overlooked points on the LIC/LIT fee battle

ASA’s view on the banning of LIC commissions

banner

Most viewed in recent weeks

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

The hidden property empire of Australia’s politicians

With rising home prices and falling affordability, political leaders preach reform. But asset disclosures show many are heavily invested in property - raising doubts about whose interests housing policy really protects.

Latest Updates

Investment strategies

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Superannuation

Meg on SMSFs: Indexation of Division 296 tax isn't enough

Labor is reviewing the $3 million super tax's most contentious aspects: lack of indexation and the tax on unrealised gains. Those fighting for change shouldn’t just settle for indexation of the threshold.

Shares

Will ASX dividends rise over the next 12 months?

Market forecasts for ASX dividend yields are at a 30-year low amid fears about the economy and the capacity for banks and resource companies to pay higher dividends. This pessimism seems overdone.

Shares

Expensive market valuations may make sense

World share markets seem toppy at first glance, though digging deeper reveals important nuances. While the top 2% of stocks are pricey, they're also growing faster, and the remaining 98% are inexpensive versus history.

Fixed interest

The end of the strong US dollar cycle

The US dollar’s overvaluation, weaker fundamentals, and crowded positioning point to further downside. Diversifying into non-US equities and emerging market debt may offer opportunities for global investors.

Investment strategies

Today’s case for floating rate notes

Market volatility and uncertainty in 2025 prompt the need for a diversified portfolio. Floating Rate Notes offer stability, income, and protection against interest rate risks, making them a valuable investment option.

Strategy

Breaking down recent footy finals by the numbers

In a first, 2025 saw AFL and NRL minor premiers both go out in straight sets. AFL data suggests the pre-finals bye is weakening the stranglehold of top-4 sides more than ever before.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.