Yesterday, the government issued draft regulations to support its LIF package, providing guidance on the controversial grandfathering and clawback provisions.
AFA chief executive Brad Fox said the draft regulations reflect the LIF legislation introduced in parliament earlier this year.
“The AFA welcomes Treasury releasing these draft regulations in line with the LIF reforms,” mr Fox said.
“We will review the regulations to better understand how Treasury’s proposals will impact financial advisers.”
In the exposure draft, the government said the regulations, combined with the legislation, will implement the reform package and are intended to address a number of issues raised during consultation on the legislation.
These include providing a 12-month transition period during which stamp duty relating to death benefits may be included in the calculation of commissions, while industry makes necessary system changes to exclude it in the future.
Furthermore, it will prescribe certain limited circumstances under which ‘clawback’ arrangements are not intended to apply, such as in the case of self-harm by the insured or where a premium is reduced due to a decision by the insured to quit smoking.
Arrangements will also be provided for the grandfathering of existing employee-employer remuneration in a manner broadly consistent with that under FOFA, the government said.
The FPA also welcomed the regualtions and said that it was still studying the details.
“We note the regulations respond in a way consistent with the FPA’s submissions to the government and regulator on the Life Insurance Framework implementation,” FPA manager of professional standards and advocacy Ben Marshan said.
“In particular, the clawback exemptions proposed in the regulations in regards to clawbacks in particular are a sensible approach to situations which may arise that are out of the hands of, or could not have been foreseen by, the planner when they developed the financial plan advice strategy recommended for the client.
“The clarification provided around the grandfathering of existing payments also provides certainty for financial planners and the businesses they work in while the life insurance framework is operating through the transition period.”
In February, Assistant Treasurer Kelly O’Dwyer introduced the LIF reform legislation into parliament. Last month, the Senate Economics Legislation Committee recommended that the legislation be passed without any changes.
Maybe the FPA needs to have a closer look at the Draft regulations 7.7A.16H. It is all in ‘lawyer speak’ but it addresses EXEMPTIONS to Clawback for EMPLOYEES ( read bank employed advisers ). I smell a rat, it is very large and very mean. This is Draconian Legislation, surely our politicians are not going to allow what is now a reasonably level playing field to be altered to one that is massively in favour of the bank owned insurers.
Oh Roger, by the looks of it such a typical response from you. Reinforces my earlier statement. Thank you.
None of my staff are members of the FPA or AFA. The quicker others take the same approach the better.
Great effort Jerry. You are so happy with the efforts of the FPA and AFA that you are not even prepared to state your full name in support of them. Well done!
Please oh please cancel your membership(s) with the FPA and/or AFA if you aren’t happy with how they’ve represented us! I for one am pleased with their effort and obviously the majority of their members agree otherwise they would be collectively expressing their disappointment through every channel possible. Roger, you talk about the “real world”, yet it always appears to be the same minority of people on these online forums whinging and complaining. The “real world” is one where things happen that aren’t fair or don’t end up in our favour despite one’s best efforts. We’ve been through many challenges already over the years, this is just another uphill battle that we need to get through together. I’d rather be in a smaller room of like-minded advisers/members embracing change, supporting each other and facing these challenges together instead of having a larger room filled with ones who aren’t! Simple.
Are you kidding me , the IFA magazine needs to start asking questions instead of promoting these moronic associations with there dribble after they sold us all out and now starting to look like they Care COMMON, ask them what payments they receive from the banks and also ask the FSC who funds them get the journalistic stories happening, we all know whats going on and the AFA is going to be a non member organization as everyone is cancelling there memberships like they should.
Still asking, still no answers….
Where is the consumer benefit in LIF?
#noconsumerbenefit #whodoesbenefit?
The AFA and FPA does not exist if we stop being members. That is the quickest way to get them to reconsider their position.
In relation to the proposed clawback arrangements, would Treasury please reveal their statistical research of the current percentage and incidence of either self harm or suicide related policy cancellations within the current clawback responsibility periods ?
Will Treasury reveal what percentage of current Life Insurance policy premiums are reduced within the current clawback responsibility period due to the life insured giving up smoking,acknowledging that to have the non-smoker rates applied to a Life Insurance policy,the insured must have ceased smoking for a minimum period of at least 12 months?
Would Treasury confirm that if the insured were to claim the insurance proceeds within the proposed commission clawback period and the insurance policy was cancelled,would this result in commission clawback to the adviser, even though the adviser had placed the insurance in the best interest of the client and the insurance policy provided the financial benefits it was designed to do at the client’s greatest time of need?
If one of the main drivers behind insurance policy cancellation is unreasonable and unjustified premium increases by the insurer due to poor claims management practices or poor actuarial calculations of risk , will Treasury consider recommending a maximum limit to annual percentage premium increases?
If the adviser is to be limited to a range of maximum commission structures, then it only seems appropriate the insurers are limited to a maximum increase level on annual premium increases.
Will Kelly O’Dwyer confirm that if a policy were to be cancelled due to incidence of self harm or suicide, the recording of that cancellation by the insurer would not be noted as a “lapse” and therefore be assumed as evidence of policy churn in the absence of detailed and granular data in the review conducted by ASIC in 2018?
Talk about shutting the door after the horse has bolted. Just disgraceful. In the “real world” the AFA and the FPA could not survive. Accept some responsibility for your actions!
AFA to scrutinise LIF draft regulations – WHY, the AFA and FPA have become representatives of Government selling bad decisions and policy (FoFA and LIFA) that do nothing to protect the public but strengthen the position of the BANKS and Life Companies. AFA and FPA have failed and as an adviser you should not pay your membership – I don’t any longer