The Future of Financial Advice ("FoFA") legislation will fundamentally reshape the Australian financial services industry. The legislation includes a ban on conflicted remuneration and other payments and is in response to collapses of Australian financial services organisations.

Australia is not alone in banning commissions in the financial services industry. Other countries have considered or are considering whether to ban commissions paid to financial advisers. The response towards a commission free or fee for service based remuneration structure for financial advisers has been mixed.

Bans on commissions

A number of countries including the United Kingdom, India, Norway, Finland, Denmark and the Netherlands have banned commissions paid to advisers. The bans differ in scope. Different approaches have also been taken to what an adviser can charge their client. The table below is a bird’s eye view of the approach by some countries.

Click here to view table.

Apart from banning commissions, other FoFA-style reforms that have been introduced abroad include:

  • a statutory fiduciary duty: financial advisers in India like their counterparts in Australia are now under a statutory fiduciary duty to act in the best interests of the client;
  • increased disclosure: advice in the UK will need to be described as either “independent” or “restricted advice”;
  • increased adviser independence: financial services firms in India that provide services other than advice will be required to keep their financial advisory services segregated either through a separate division or a subsidiary.

Developments in other markets

Europe: The European Parliament’s Economic and Monetary Affairs Committee (“ECON”) has rejected an outright Europe wide ban on commission payments paid to independent advisers from third parties as part of the MiFID II changes currently under consideration. Instead, it proposes a system of “enhanced transparency” where advisers will be required to disclose to clients any commissions or monetary benefits received. It remains to be seen whether ECON’s position will be the final one adopted. However, ECON’s proposal does allow individual European Member States to ban commission payments on a State by State basis.

Hong Kong: The general push in Hong Kong is to focus on enhanced disclosure of commission payments. A move to a fee based structure remains unlikely in Hong Kong in the near future.

Singapore: The regulatory authorities in Singapore are still reviewing a proposal to ban commission payments to financial advisers. Although the result of their review processes are not expected to be announced until the end of 2012, the proposal has been met with opposition from investors who are used to receiving “free” advice in financial advice industries that are largely commission based.


Countries are approaching issues relating to commissions in the financial services industry differently but there are some common themes. Banning or restriction benefits given to advisers will impact not only advisers but also how financial products will be distributed.