“The Trowbridge process involving the AFA and the FSC went down the formal process that at the time we decided wasn’t the process that we wanted to be involved with,” Mr Rantall told ifa.
“We decided we would in fact respond to the FSI inquiry, which was a formal government inquiry with a formal recommendation on the table.”
Having remained quiet throughout the LIAWG, chaired by John Trowbridge, the FPA has begun to release its proposals for reforming the sector.
After rejecting a level commission structure within its final submission to the FSI inquiry, the FPA has recently released a ‘life insurance blueprint’ that outlines 10 points for reforming the industry, including a proposed upfront commission model “capped at four times recurring revenue”.
“The proposal the government needs to respond to is the FSI inquiry proposals about level commissions and we didn’t support level commissions for all the reasons we have articulated,” he said.
Also commenting on the FPA’s decision to support an upfront commission model for insurance despite a strong stance against commissions inside investment advice, Mr Rantall said insurance and investment are completely different.
“Our concern [about] removing commissions from insurance [is] that insurance advice will be out of the reach of people who most need it and that are the lower-income earners,” Mr Rantall said.
“We see insurance as a different product set – it is [an] annually renewable product that people can come out of at any time and has a different make up to investments.”
The the issue is not the remuneration model !
If they want to remove the ‘conflict’ of different upfront commission levels then handle it at the PDS/Prospectus level. Eg SET commissions on a Hybrid model 85% upfront and 20% renewals. There is now no reason for an adviser to select product based on remuneration – does that actually happen ?!!! – Let alone the fee disparage that exists between fee for service advisers for the same service.
It is then open in the market place for the product providers to release competitively priced and better featured products. Move then to an open APL platform where advisers chose the most appropriate products for clients. As for churning, continue to pay the renewal commission for any policy transferred in the first 5 years.
We need to adopt a simple, sensible and practical approach and not continue to throw senseless $$$ away – learn from the FOFA debacle, please!!
What matters most is the final result for advisers and your members FPA. My view is that you should be arm and arm with the AFA on this one. I hope you are. A united adviser body voice is essential.