In a post to his LinkedIn profile, the chief executive of the Association of Financial Advisers (AFA), Phil Anderson, has clarified the most recent proposals made under the Quality of Advice Review (QAR), specifically those impacting risk advisers.
Namely, earlier this month, Michelle Levy published a snapshot of the data the QAR has considered on general insurance and life insurance, and a set of proposals.
Among them, Ms Levy recommended that financial advisers who provide personal advice to retail clients in relation to life risk insurance products must obtain their client’s “informed consent” before receiving a commission.
As expected Ms Levy’s proposals gave way to a flurry of concerns particularly around how disclosure would impact an ongoing commission.
In a LinkedIn post this weekend, Mr Anderson labelled this concern “misinformed”, and revealed that the AFA had met with Michelle Levy and Treasury where this concern were addressed.
Mr Anderson said that Ms Levy confirmed that the consent requirement “would be a [one-off]”, and not an annual requirement. “Where consent has previously been obtained from the client, it would not be required again,” he confirmed.
Providing an example, Mr Anderson explained that if the upfront and ongoing commissions were previously disclosed in an SOA and the client signed the Authority to Proceed, “then this is consent and nothing more would be required”.
“Disclosure of ongoing commissions could be as simple as the commission rate and the dollar amount on the basis of the first year’s premium,” Mr Anderson said. This, he noted, is consistent with current practice, and not an additional obligation.
“There is no expectation of predicting commissions payable over multiple years,” he added.
Finally, he said, while the adviser needs to keep evidence of client consent, “there would be no requirement to provide this to the life insurer”.
“The bottom line is that this is nothing like annual renewal and client consent in the super/investment space,” Mr Anderson assured.
“Clients providing informed consent is not unreasonable. This already happens. In a future world where SOAs are not mandated, we will need to have other ways to ensure disclosure of commissions and confirm consent. That is not difficult to resolve, particularly where it is principles-based, rather than prescriptive.”
Ultimately, Mr Anderson said, “advisers should not fear this QAR proposal”.
“We need to continue to support the QAR for the work that they are doing to deliver fundamental change to the advice process and to reduce the cost and complexity of advice. Let’s all get behind what they are doing”.
Phil, I’ll get behind the QAR when I have the same playing field as Levy has proposed for product floggers i.e. FASEA requirements do not apply to limited/simple advice or whatever Levy is proposing. Until then, take a hike.
While you are at it could we also have informed consent for members of industry funds as to whether they really want to be an industry fund member.
As long as FASEA code of ethics exist there is no such thing as Good Advice. Michelle has absolutely no clue. Phil Anderson you should also be ashamed of yourself- BOOO! Where is your integrity!?
QAR only supports superannuation fund because that’s what this current labour party supports. We all know it. I would like to conduct a review of Michelle Levy’s bank accounts and review if there was any conflict of interest payments made by any political parties!!!
Ms Levy doesn’t seem to understand our industry. Welcome to an SOA which discloses upfront and ongoing commissions – what else do you want. I am frightened that she has the potential to make recommendations that could have a lasting detrimental impact on our industry.
Should we simply schedule our next Royal Commission now?
Conflicted call centres, robo-advice, and other unqualified people selling their own products with no consideration for the client’s circumstances or how their “advice” will benefit anyone other than themselves/their employers?
Has our industry learnt nothing from previous mistakes?
That’s a NO Phil – but thanks.
I am an independent adviser.
I would like to meet with clients for 1 hour, review their situation, and decide whether they are a candidate for holistic or limited advice. If they are a candidate for holistic advice I would take them through my normal process. If not, I would like to be able to recommend they make some small changes to their super or investments to ensure they get more out of what they have and send them on their way.
Currently I cannot do that, as even thouh it is limited advice I need to provide them with an SOA, I need to document why whatever I recommend is in their best interest, I need to record details of the alternatives, I need to make sure I have scoped other things out correctly…
Under the QAR, I will still not be able to do it. Sure no SOA, but I will still need to do all of the other things. However, if this same person got on a phone call with a company called “lets make super grate again” they would be able to recommend they move their super to LMSGA as long as it is ‘good advice’. All done without so much as a thankyou note, and no clear definition of what good advice is.
Yes I cannot understand the rhetoric alluded to in the QAR, that qualified planners cannot give simple low cost advice, but that it should be reserved for the call centres, robo-advice etc. Wouldn’t it be better for qualified planners to be able to handle this as well?
Yes, hard to make this stuff up.
So if the ongoing risk commission consent can be a “one off” then so can a fixed ongoing fee from a super fund be a one off (unless it is changed). Absolutely no difference. Time to get rid of Annual consent forms that only exist in Australia & nowhere else on Earth.
What about the part of the QAR where conflicted call centres, robo-advice, and other unqualified people can sell product with LESS regulation than fully qualified professional planners?
Dear Ms Levy & Treasury, let’s see you document and confirm to us all what has supposedly been told to the AFA.
Given the the last 9 years of ever increasing regulatory madness strangling Advisers, we simply don’t trust Regulators or their so called experts.
Great to have some clarification.
Thanks Phil.
Phil, any comments on the fact that after the QAR, product providers will be able to market directly to consumers, ask them to fill out a very short questionnaire, give them a generic printout that directs them to one of their own products, and still call this advice. Oh and all while not having to actually act in the clients best interest.
Who is it that the AFA represent?? Its members or its partners…
sure, more than happy to ‘get behind’ the QAR providing that advisers for once have input into the decision making process, predominately the removal of any proposals allowing advice carve-outs for product providers and Instos. – agreed?