Earlier this week, AFA member and director of Now Financial Group, Mark Dunsford, announced his plans to call for an EGM to convince the AFA board to withdraw its support for the LIF in its current form.
His email announcement was distributed to AFA members via the LICG.
Following the announcement, AFA president Deborah Kent said the association would conduct an investigation into the legality of the email. She also urged members to reject Mr Dunsford’s push for an EGM.
“At a time when advisers are repeatedly sharing with us that stability and certainty will help them to get on with the job of looking after clients, this action [EGM] is likely to cause exactly the opposite,” she said.
“If we are to be respected as a profession, and for the AFA to be respected as a professional body, then we need to continue to earn that respect through our conduct. An action like this is likely to reduce the AFA’s credibility and effectiveness in representing the interests of AFA members and your clients.”
Ms Kent said Mr Dunsford’s email calls for a change to the AFA constitution and would mean that the association would be forced to support the retention of upfront commissions in excess of 100 per cent.
“The proposed change would be the AFA board would not be able to form any policy position or negotiate any policy position with government [and] other associations or consumer interest groups without calling a general meeting and conducting a member vote,” she said.
“This is a critical time in the profession’s development. AFA members need representation at the decision-makers’ tables. This change to the constitution would reduce, and possibly remove, the AFA’s relevance as a voice.”
In his email, Mr Dunsford argued that the AFA had not represented advisers in the LIF reform process.
“Many AFA members have expressed their concerns to us that the proposed LIF reforms clearly do not provide any benefits to consumers whatsoever and only serve to boost the profits of insurers at the expense of consumers, advisers and their businesses,” Mr Dunsford, who is also a key LICG member, said.
“This shameful situation needs to be called out. If the AFA withdrew its support from the LIF, [politicians] would have reason to reconsider the legislation and, in particular, be able include all the compelling and factual evidence provided from the good work done by the LICG.”
In the cold war we were fighting against communism and its so called evils because we allegedly wanted democracy and freedom.
In all aspects of society including politics and business the wary are now fighting a form of facisim where the few control the majority. Notions like freedom, democracy and individuals being held to account are merely catch phrases used in arguments. Anyone that today fights for these notions gets accused of wanting to destabilise the current order followed by the inevitable illogical and emotional arguments why we should stick to status quo.
Shake it up guys.
Paul, agree fully with your 2nd point. When a Director of my Licensee asked a Fed member if he’d agree to returning some of his income if he didn’t serve a full 3 year term, he naturally said that would be ridiculous – his main argument, he still had to do all the hard yards even if he didn’t stay in office for the full 3 years.
At least we now have 2 years.
I’ve covered some of your other points already.
What has impressed me the most from all of this is the considered responses. To a degree some of my firmer views may now be a little more fluid.
At the end of all of this what I definitely don’t want to see is 20% level or NO commission as the only options in a few years time. This would only decimate the risk industry, leaving so many Australians no option but to fall back on governments that simply can’t afford them and vertically integrated businesses.
And yes, I wouldn’t say no to a 1 year claw back irrespective of the limited experience I’ve had in premature policy cancelations.
Yes Tim, I am aware. As I said above to Mark we have the chance between now and the 25th to determine who is going to best represent us going forward.
Being licensed through Australia’s largest [by AR numbers] Licensee since 2002, I absolutely agree with your comment son NON-aligned advice access for all Australians. And of course, limiting commissions does impact the lower end of the market the most. Something the vertically integrated FSC members well know, the Federal Government just doesn’t get and the consumer groups simply don’t live in our world.
To a degree I agree “Reality Check”. I started my own adviser business in 1987 and chose to go down the hybrid comm path in late 1992 – at a time when I really couldn’t afford to do so, but I took a long term approach.
As I said above to Mark, 2 year claw back does not present as a major issue to me. Having focussed on qualifying clients before choosing to do business with them has perhaps helped me. This said, I understand that we cannot control the fickle nature of human beings, so I can see & understand the negative side to this issue.
However, Mortgage Brokers have still prospered with a 2 year claw back, and I would venture to say in 2016 there is a greater risk of mortgage refinancing happening within 2 years compared to insurance policy replacement.
One thing I do agree with very strongly is the FSC comment. I have “privileged” knowledge from one Life Office CEO who tried to stand against the vertically integrated businesses and their totally biased agenda…if only we ALL could have been “flies on the wall” at all those industry damaging FSC meetings.
Hmmm, Mark. For decades it has been the life offices setting the limits on comms paid…when have we ever had the choice to set the actual maximums? Never! What we have done over the past 30 years and I imagine we will still do going forward is employ comm sacrifice if in competition etc.
Anyone who can declare they never considered a product with 135% upfront as opposed to [say] 110% upfront…well, I’ll leave that to your imagination.
The 2 year claw back is here to stay…in 30 years I have had 2 policies “cancelled” within 24 months of issue. Thus my personal experience simply doesn’t support the concerns raised around this.
Interestingly, the AFA is currently open for change right now…until 25th of August. I’ll be voting for representation that is not influenced by the likes of the FSC and where I feel they will represent my best interests going forward.
Calling for an EGM to me is akin to Shorten calling for a Royal Commission…total overkill and in the end costing heaps for little or no real benefit…especially none for the forgotten people…our actual clients!
The LIF “fight”is done and dusted. From hereon it has to be about a united front and the right representation through the strongest industry body we have available.
Phil, this isn’t just about remuneration and hybrid structures. Whilst I agree that comm’s in excess of 100% are unconscionable, the AFA have dropped the ball for their member base – a few points if I may:
1. it is more about unilateral decisions being made by people who have not consulted members of their association. The AFA representatives have been caught short by the FSC, who are clearly more adept at playing the AFA rep’s for what they are. The AFA are clearly out of their depth and a they now have a result which reflects their ability.
2. Clawback: who in their right mind would agree to a business whereby the income generated could be retrospectively clawed back years later if the policy cancels due to no fault of the person who wrote it? I agree that serial churners need to be called out – but the clawback as it stands goes beyond the pale and for the AFA to side with the FSC on this was not representative of the members needs or desires.
3. Free Market/enterprise: to echo Mark A Harris – as I understand it, this is a free market – the consumers will vote with their feet. The current manipulation by the Life Co’s/banks to get what they want with the carve outs for direct products etc does not represent a free market, moreover a cartel headed up by the FSC and naively supported by the AFA.
4. Similar to you, I have used level and hybrid commissions for some years based on the increased value to the business, but that is only because my business is at an age and size where i can afford to do so. Based on your comment about making a decision to shift to hybrid back in the early 90’s tells me that you must be at least in your 50’s, possibly in your 60’s? Well as long as you are okay, then everyone should be okay, right? How is anyone joining the industry/wanting to join the industry supposed to get a leg up when their very livelihood is under attack before they even start? This industry has an issue with succession planning as it is, putting rules like this in place only compounds the issue – but as long as you are okay…..
Therefore have your say, support an EGM and vote the way your want to. AFA members can get an EGM request form by emailing afaresolution@gmail.com
Hi Phil. Agree with you in much of what you say, however just so you are aware – the members of the LICG are AFA members FIRST and FOREMOST – NONE of the advisers who are part of the LICG team are pushing to go back to the past. There is no one pushing to retain 130% up front comms etc. (On that the statement by Deb Kent was completely misleading).
However the LICG members are keen to ensure that there is a future for non aligned advice and advocacy in the insurance space as under the LIF and with future ‘revisits’ to come – that will become increasingly unlikely. Mate the AFA needs people with a passion for advice and who supports those who provide it – that’s why this needs to be called out as regrettable and hard as that is for all involved…
Firstly you should be proud of having built up an obviously successful business.
BUT
Many adviser who choose to be independent risk advisers do no have the luxury of so many years behind them.
Most advisers I know don’t have a problem changing to hybrid but it’s the 2 year clawback and reduction in the levels of hybrid that must be fought.
Not having this contributed to the good position that you are in today but you cannot forget or right off the next generation because this won’t effect you.
What you are seeing here is an asserted effort by the FSC to get rid if the independent competition because many won’t survive and new entrants have no hope unless they work for the banks.
The FSC simply want you and advisers like us out of the way so that they can sell business directly with little or no advice or through aligned and controlled distribution.
This could not be clearer as an agenda.
We do need a combined front. We have not received this from the AFA leadership to date and an AGM and vote is vital to get to that point.
The AFA have become too financially reliant upon funding from those who want us out of the way and it’s time to get back to where this association should be.
Phil, I am sorry but I need to disagree with you here. I to have been an adviser for 30 years and whilst I agree that HIGH upfronts have no place in our industry, what I do disagree with is having my right to set my remuneration to what ever level I wish to do so taken away. We are suppose to be living in a free enterprise society, well last time I looked “FREE ENTERPRISE” meant let the MARKET decide. I also disagree that anyone should have PAY BACK income earned in good faith after two years should someone cancel a policy.
All the proposed Life Insurance Reforms do is MAXIMISE PROFITS for the manufacturer of product and screw the consumer and the retailer. We are no different to any small retailer which is being BULLIED into submission by the bigger retailer who want to maximise their market share by wiping out the small non aligned operators who actually care for their clients.
The AFA is supposed to represent ADVISERS, not the owners of the manufacturer of product. Most of the so called reforms in the past have done nothing except put more power into the hands of the BIG 5, the corruption in the Financial Services Industry still exists and will continue to exist until you separate ownership of the manufacturer and ownership of distribution.
If the management of the AFA is so right why is it they don’t want us to vote on it. Bring on the EGM and the AGM, we the members of the AFA have a RIGHT to the vote and our say.
Unbelievable…upfront comms of [up to] 135% are gone!
We MUST now show a unified front to the government and others such as the consumer groups that simply don’t get it…the genuine reason why comms work the best when it comes to risk only insurance!
Do you really want 20% level comms as the ONLY option in 2-3 year’s time?
I do not agree with all of the LICG statements and they do NOT speak for the “majority”.
I do agree that perhaps the AFA could have done better by us, but I’ll still pay my renewal this month as UNITY is what we need to publicly demonstrate right now.
I am a professional risk specialist adviser and have been so for the past 30 years.
In 1993 I made the choice [with Lumley Life] and went down the [then] 80/20 hybrid comms path. Whilst I will likely enjoy $250k to $300k of new commission income in 2016/17 [hybrid], it will still be far less than the amount of ongoing renewal income received in the same year. And it will stay so irrespective of what new business comms are being paid down the track.
It was the smartest thing I ever did – sure it hurt for the first year or two. But the pain is long gone!
The life offices were NOT the only ones pushing upfront comms for so many decades – it was also the short-sighted agents taking the upfront comms – the ones who kept getting out of bed on 1 January each year “crying poor” and having to go out and do it all over again!
Hybrid is here to stay…and if you don’t want it to become “level” comm in a few years time…stop whinging, show a united front and get on with business. Prove to them we deserve to be viewed as “professionals” and that we deliver a vital financial service unparalleled anywhere here, or in the wider world. $8 billion paid to Aussies in 2015 is testament to the financial security we deliver and fundamentally why we do what we do. If you do it right the first time, the remuneration will look after itself.
And while I’m here…
I joined the AFA a few years ago because I felt they were the only adviser association (of any size and substance) that fought tooth and nail against some of the unfairer components of FOFA. Ultimately they (and we) lost out to self-interested product manufacturers, ignorant consumer groups and ISF-loving Parliamentarians.
But the key for me was, despite the likelihood of defeat, the AFA went down fighting the good fight for the vast majority of their client-focused adviser members.
However, on this issue they seem to think supporting a policy position and associated legislation that will decimate their risk-focused members is better than fighting a stacked and flawed process that to this day has not identified a single consumer benefit.
There’s no guarantee the Hybrid model will be retained long-term anyway, so if we’re going to be ruined – I’d at least like to see my adviser association go down fighting next to me and not jumping into the lifeboat with the people who torpedoed us.
I’m an absolute believer in the principal that if you don’t stand up for what you believe in, then you’ll fall for anything.
What I’m seeing here (and fully support) is the absolute sincerity of risk insurance advisers looking after the well being of their clients primarily and the future of our industry. While there has clearly been a push by the AFA (and life insurance companies supporting them) at recent roadshows to persuade ‘riskies’ to just accept the LIF reforms as they’ve apparently been accepted, the glaringly obvious fact indicates the vast majority of us don’t believe they are for the better of the industry and definitely not for Australian consumers of life insurance products in the future, if accepted in their current form.
Putting aside that the AFA is now attempting to create a decoy to the LICG EGM instead of accepting that their members are clearly peeved with how they’ve been represented with these reform discussions, what keeps nagging away at me about the drivers behind them is the narrow minded and short term thinking of the senior management at life insurance companies who have pushed for Upfront Commissions (that I personally only write maybe 1 in every 30-40 cases now) to go altogether so they can been seen to have improved their profitability so they get paid their massive bonuses. They then move on to another role 3-4 years later leaving us ‘riskies’ with an industry in absolute turmoil.
I absolutely believe there is still a place for Upfront Commissions – for new advisers coming into the industry in particular. I wouldn’t have joined the industry 8 years ago had what’s being proposed now been in place back then.
I hear what Deb Kent is saying about this EGM potentially upsetting the apparent stability the Government perceives we now have but I think that’s a secondary issue to the perception AFA members have that the AFA rolled over like a mangy dog instead of standing up for what us ‘riskies’ believe should have been the AFA’s stance.
What an appalling and petulant response from our illustrious el-Presidente! There is nothing in the EGM notice that says “…the association would be forced to support the retention of upfront commissions in excess of 100 per cent…”. All it calls for is a rejection of the LIF legislation.
I mean seriously, it almost appears that the AFA ‘Leadership’ are saying – support what we have done or we’ll take our Tonka toys, go home and you’re on your own.
The AFA made a massive mistake pairing up with the FSC and Trowbridge and now want to support a position that will hurt a large number of their members just to cover their tracks and to be seen to have ‘achieved’ something through this debacle they willingly entered into.
It looks to me like they got what they wanted out of the FOFA and other reforms – which is for all financial advisers to be a member of a professional association – and now they can cow-tow to their FSC mates and sponsors.
How about calling out ASIC for producing a fundamentally flawed report into ‘churning’ by only reviewing advisers that the insurers dobbed in for churning??!!
I am more than happy to have it known I sent in an EGM request as I expect to get shafted by Labor, the leftie-Choice mob and FSC members. I do, however, expect more from my supposed adviser-focused association than a jar of Vaseline!!
Keep this up and you’ll be looking down the barrel of a full Board spill – not just a vote on opposing legislation that will decimate a large section of your membership.
Lift your game AFA!!
The AFA leadership have really been showing their true colours recently. They previously pretended that adequate adviser input was made before agreeing a terrible deal with the FSC for the LIF. Now that members are in major disagreement and want their mandated ability to call an AGM and have a proper vote on this they are now trying to find a way out of this also.
It is quite clear the AFA leadership care more for supporting the FSC and the sponsorship they bring than the true independent adviser members and ultimately the customers.
By rejecting the will of members to have a vote on this subject the AFA leadership are selling out on any resemblance of ethics or professionalism.
Deborah and Brad. Your members have spoken, hold the AGM and the vote otherwise what are you afraid of?
I am a long time member and supporter of the AFA as my father was before me… the LICG is full of strong supporters of the AFA and is not anti the association in any way – however the advisers in the group are serious about risk insurance and have considerable exposure to the business risks which the general tone and direction of the FSC comments and the LIF are leading us towards.
The whole debate has been poorly conducted and its clear that the objective had an adviser focus rather than a consumer one. There were no numbers put forward around the cost of churn – yet it was the number one reason put forward for the changes. Churn could have been dealt with in a number of ways without effecting the revenue of risk advisers. That said, most accept that an 80/20 position is acceptable but if we don’t draw a line in the sand and make our bottom line clear – the majority of IFA’s who work in risk will be out of business shortly after 2018 – when ‘surprise surprise’ the FSC still finds that the revenue being paid up front is unsustainable… and they push for a flat 20%.
The LICG is simply calling for greater representation by its professional body… why shouldn’t it do so? We have every reason to be worried about the future of risk protection advice in the current environment of greedy profit driven product providers and association bodies who appear to bend to their greedy agendas for fear of being side lined politically. Its a sad state but its time for SME IFA’s to stand up and be counted.
Thanks Deb Kent, you seem to have forgotten that the AFA is not your own little fiefdom where what you say, goes. You are meant to represent the members of the association and if you are so confident that your decision to support the proposed changes are supported by the majority of AFA members, let the EGM take place and let the likes of Mr Dunsford take the risk of looking like fools. If you are not confident then bring out the legal team and let this whole thing play in public.
Off with their heads! They don’t represent the people who pay the fees.
How dare they ask for a say in how “their” organization is run.
Instead the AFA shall continue to kowtow and kissass to the lord and master government – who coincidentally were elected by people, just like advisers!
And they are close to getting kicked out as well because they fail.
Lets face it, if you as the AFA roll over and give in to the government on this, then there is little representative value in your existence and you may as well be replaced by a group of people who are more proactive in continuing the existence of advisers.
Either you represent the best interest of the advisers on behalf of the advisers, or you serve another master.
I say the AFA should have put something this important to its Members first before agreeing to LIF. Was this done? If it wasn’t done, then I agree with Margaret, put it to the vote.
Maybe the AFA should google themselves.
This is what it says in case the AFA don’t know.
“The Association of Financial Advisers (AFA) represents financial advisers and the value of advice across Australia”
Well really AFA many advisers think you are AFI, The ASSOCIATION OF FINANCIAL INSTITUTIONS.
What an absurd joke of an adviser body you have become. Please stop the absolute rubbish political spin you constantly try to defend the FSC and Institutions. It’s utter rubbish.
What is shameful is the AFA supporting its sponsors over its members. Why not have a vote and settle this once and for all. No, the AFA wants to strangle the democratic rights of its members and ruthlessly support the LIF, even though almost everyone agrees there is no benefit for consumers in the LIF. Risk adviser, would you please ask the AFA and FSC to produce any empirical evidence that shows that consumers will benefit under LIF and the Banks and Insurance companies will not?