Following Assistant Treasurer and Minister for Small Business Kelly O’Dwyer’s announcement last week that “significant improvements” had been made to the LIF, AFA national president Deborah Kent said the combined efforts of the AFA and FPA have resulted in a reduction of the three-year clawback policy.
“To succeed in having this reduced to two years is a great relief for our members, particularly those that own and operate small businesses,” Ms Kent said.
“In an electronic poll held at our recent National Adviser Conference in Cairns, our Members indicated almost unanimously that three-year clawback was the greatest issue in the reforms. That was consistent with the view of our board.
“What we look forward to now is insurers delivering vital efficiencies into the advice, underwriting and claims processes to support advice business facing significantly reduced upfront income,” she said.
The AFA extended its thanks to the FPA, which shares a common position in negotiating for change with Ms O’Dwyer.
FPA chief executive Mark Rantall said the package represents a “sensible outcome that will help ensure the sustainability of the industry”.
Mr Rantall also commended Ms O’Dwyer for consulting and listening to the concerns the industry had regarding the original framework proposed by then Assistant Treasurer Josh Frydenberg.
“The FPA supports the need for a model that enables financial planners an appropriate amount of time to transition,” he said.
“We are deeply committed to supporting members through these changes and encourage members to make use of The FPA Life Insurance Advice Guide.”
Also commenting on the revised framework, The Financial Services Council said it welcomed the reforms, and a proposed review by ASIC.
However, the FSC also emphasised that in the long term, more refinement will be needed to improve consumer outcomes.
“If consumer outcomes do not improve, the Government has given a clear commitment to implement the Financial System Inquiry’s recommendation of a level commission model in 2018,” FSC director of policy Andrew Bragg said.
“As the financial advice profession matures, we expect all financial advisers to move to a fee-for-service model,” he said.
The FSC added that many advisers have already moved to this model, and that these reforms “must be implemented in a way which encourages the transition”.
The final reform package is scheduled to start on 1 July 2016, leaving just over six months for the industry to transition to the new framework.
Thanks to the FSC what can insurers look forward to after 1/7/16?
Receiving far less new business due to the two year clawback which means less insured Australians and lower executive bonuses. Well done champs…you may have won the battle but will lose the war.
“As the financial advice profession matures, we expect all financial advisers to move to a fee-for-service model”…REALLY…WOW. Where is the evidence that this will provide for better consumer outcomes? Can I assume then that the FSC will be driving for an end to the VI model? or is the plan to kill off all the IFA’s and cross-subsidise the “fee for service” risk advice. I can just see it now…Mr client, we now operate in a fee for service world for Risk Insurance advice as those commissions were a complete conflict of interest. It would normally cost $3,000 for us to provide you with Risk Advice, but if you choose to use this insurance product, we will waive the fee. Or better still, why bother going to see one of these pesky risk insurance specialists when you can just log onto our robo-advice site (read direct insurance flog site). For any insurers that value the IFA channel, this may be your best opportunity to establish a new lobby group. I for one would be prepared to strongly support any such insurer/s, knowing that not only is it in the Best Interests of my clients, but Australians as a whole ,that a thriving IFA market exists now and into the future.
Andrew (FSC) please define “many”. What percentage of planners and what % of specialist risk advisers? Don’t use throw away lines like that unless you can back it up. Go and talk to real clients. Maybe when the clients mature and understand the need for insurance we can move to FFS.How many real clients in suburbia are going to pay fees (or even afford fees) for something they don’t even want but actually need. And consumer outcomes. OMG look in your own back yard. Get your members to improve the consumer outcomes. They encourage, entice incentivise advisers to move business regularly. They get clients in on low premiums and surprise surprise they put them up but the adviser gets slammed for moving the client to a more competitive offering. The FSC and its members need to take some responsibility for this mess. Tell me what is the FSC doing about its members practices? I can hear the crickets!
It seems that the only people believing this “successful” outcome are the FPA and AFA. Shamefull outcome! 3 years was never going to be the outcome and 2 years is NOT acceptable.