The final report of the Hayne royal commission recommended commission caps be reduced further than that laid under the Life Insurance Framework.
Commissioner Kenneth Hayne said that, “unless there is clear justification for retaining those commissions, the cap should ultimately be reduced to zero”.
ASIC also confirmed it would review current life insurance commission arrangements sometime in 2021.
But in a blog exclusively written for ifa, Lifespan Financial Planning chief executive Eugene Ardino argued that, should the recommendation be implemented, clients will gravitate towards inferior or inappropriate “self-service” or online insurance products.
“Many financial advisers will say that if clients don’t want to pay a fee for advice, then that’s their problem and it’s too bad if they get inferior insurance or none at all, and it’s more important for the industry to make the transition to a profession,” Mr Ardino said.
“However, I think this is a callous attitude which puts the needs of the advice community ahead of the public interest.”
While Mr Ardino said he’s all for our industry becoming more professionalised, he would like to see it done in a way that allows more Australians to access advice, not less.
“The hypothesis that if we appear more professional then more people will obtain advice, no matter how much it costs, is an unrealistic and irrational fantasy,” he said.
“For the vast majority of consumers, a commission structure for life insurance is actually beneficial and can be quite sensibly justified.”
The Life Insurance Framework is divided into three stages, beginning in 2018 and continuing in 2019 and 2020. The first stage has already passed, with an initial commission rate of 88 per cent and a 22 per cent renewal rate.
The framework is currently at the second stage until the end of 2019 where the initial commission rate is at 77 per cent and a renewal rate of 22 per cent, before moving on to stage three at the start of 2020 where the initial rate is at 66 per cent and a renewal rate of 22 per cent.
To read the full contributed article by Eugene Ardino, click here.
Here’s a tip for ASIC. I predict that after risk specialists are forced out by LIF/FASEA, two of many policy nasties of yesteryear will make a re-appearance under DIRECT sales sold under that ASIC favourite, GENERAL ADVICE. In the early 1990s, AMPAC/Westpac sold a life policy with an exclusion which prevented a death/trauma/TPD benefit being paid if an injury involved “any material breach of law”. AMP itself had a “pandemic” exclusion which limited benefits being paid from elsewhere if a nominated Statutory Fund was exhausted by claims. Apres risk specialists , le deluge!
What was/is needed is a Commissioner who actually understands the industry, workings and materials he was hired to given an opinion/direction on. Hayne obviously did not and approached everything like a true lawyer – including the fact he commented that it shouldn’t be assumed a client would read or understand a lengthy SoA and therefore his best solution proposed was to give them another lengthy document on top of the SoA that summarised the SoA. ASIC are no better as they have people making rulings with no understanding or real world industry experience either.
Mr Adviser, ‘I want to buy life insurance and I want to pay Insurance company the premium and on top of it pay you Mr Adviser for advice!’
For gods’ sake this is not going to happen for 99.9% of the cases!! How hard is it to understand this?
Why doesn’t anyone just look at the recent APRA study on insurance claim admissions etc. Despite a conflicted payment mechanism advised clients have a far better experience… Perhaps potentially conflicted advice is better than none at all? Hayne is an ideologue and like climate change deniers he won’t be swayed by research or numbers, not that any was provided to the RC…
Clients need advice! Otherwise inappropriate insurance taken up, poor underwriting no assistance at claims time best value products not used, or, in the case of the self managing, no insurance.
From the laughable decisions and impact I’ve seen the idiots running this industry, specifically ASIC who have no clue whatsoever what they’re doing have had on this industry the last 3-4 years, I’m absolutely certain that whatever the truly right decision is that’s REALLY in the best interest of Australian consumers and the advisers working for them, the exact opposite is what will actually happen!
There’s no common sense shown in this industry any more so brace yourselves for another outrageous decision – those of you that stick around. I won’t be one of them. I just can’t stomach the lies, the greed, the corruption, the manipulated data that’s released to the media or the conflicted education body any longer. You all deserve exactly what’s coming.
I personally would rather see my clients fully insured with the right insurance cover that I know is going to pay if they make a claim and the risk adviser gets paid a commission for the work they do, then to ban commissions and have those clients organise their own cover (which they’ll never get around to doing) and don’t have the right cover in place. So many of my clients have benefited from the right advice from an adviser. Did they resent the adviser being paid a commission, I don’t think so. Did they also resent the fact that I was paid a referral commission, no way, they appreciated that I saw a gap in their asset/income protection and did something about it. Fee for service for insurance advice won’t work, it will lead to high levels of underinsurance which will end up costing the Social security system (ie the taxpayers) more in the long run.
This is from a government that has just actively engaged in ending what little life insurance many people had. Ideology over common sense rules both sides of parliament.
Maybe a little bit of that wasted money on government media should have gone into ads extolling people to open those envelopes from their super fund as their sole life insurance was about to be terminated?
The super fund provided life insurance generally was inadequate but it was better than nothing.
Now we will have a race to the bottom.
The haves and have nots will be even starker in the coming decades.
[quote=Rob][/quote][quote=Daniel Gara, AdviserLogic]Eugene, thanks for being the voice of reason. What you’ve said here seems so incredibly obvious to those on the inside. It is a shame that the government, regulator and much of the public don’t see it the same way.[/quote] If the regulator and much of the public don’t see it the same way then I would suggest you might be on the wrong side of the argument.[/quote][quote=Rob][/quote][quote=Daniel Gara, AdviserLogic]Eugene, thanks for being the voice of reason. What you’ve said here seems so incredibly obvious to those on the inside. It is a shame that the government, regulator and much of the public don’t see it the same way.[/quote] If the regulator and much of the public don’t see it the same way then I would suggest you might be on the wrong side of the argument.[/quote]
I’d like to get my weekly food and beverage from my local grocery store for free. Get my car serviced…for free. Get all my medical needs funded by a benevolent third party…for free. I mean, why should these folks have any right to profit from my needs and wants.
Quick show of hands for all in favour…I see a few dissenting hands from Woolies shareholders, everyone else wanting FREE stuff (product and service). And while we are at it, lets give all the insurance products cover away for $0 premium??? Great! All motions carried!
Do you still think Daniel O’Gara’s on the wrong side of the argument? Sometimes those proposing against common sense end up destroying, Woolies, Coles, the medical profession, etc…
I’ve got a number of young professionals I’m working with on a commission-only basis. They wouldn’t be able to pay for advice + insurance commissions and would, therefore, be uninsured (thanks for the PYS reform, which really only took away their basic default cover anyway). Keeping commissions delivers massive value to the community!
Fully agree… amazing how the team of lawyers (who know nothing of this industry) seem to think that this industry should behave like lawyers.. just give me a break. We don’t trust lawyers as far as we can kick them. Mr Hayne will be remembered for all the wrong reasons, how he manipulated the RC to achieve their “predetermined” objective. Also, can some over paid public servant go the UK and actually learn from what happened there. They destroyed the industry for this ideological crap and guess what has happened since – You bet.. COMMISSIONS have been reintroduced (at higher amounts)!!! Could save alot of time, pain and money if a proper and fair review was undertaken.
[/quote][quote=Daniel Gara, AdviserLogic]Eugene, thanks for being the voice of reason. What you’ve said here seems so incredibly obvious to those on the inside. It is a shame that the government, regulator and much of the public don’t see it the same way.[/quote] If the regulator and much of the public don’t see it the same way then I would suggest you might be on the wrong side of the argument.
Eugene, thanks for being the voice of reason. What you’ve said here seems so incredibly obvious to those on the inside. It is a shame that the government, regulator and much of the public don’t see it the same way.