In an email to his members, executive director of the AIOFP, Peter Johnston, said a conversation with the executive of a “leading product manufacturer” has revealed there is now a “deep rift” in the relationship between the advice associations and the FSC.
“The FPA and AFA are livid with the FSC over being manipulated to meet the FSC political objectives to heavily tilt the market in favour of direct internet/telemarketing sales and a return to in-house institutional conflicted advisers at the expense of independent advisers,” Mr Johnston said.
“The FSC needed the political support from the adviser members of both the FPA and AFA to convince the Minister that they had widespread industry support to justify the recommendations in their [proposal in June],” he said.
Responding to Mr Johnston’s comments, FPA chief executive Mark Rantall said the association has a “good working relationship with all associations”, dismissing the comments as “unsubstantiated rumours”.
“We have worked very hard with the industry to get a self-regulatory solution to the issues in relation to risk [advice] and we have done that in a collaborative way with our members,” Mr Rantall said.
“A self-regulatory model is far preferable [to] a legislated solution of level commissions only as recommended by the FSI Inquiry.
“We think it is unhelpful to have the noise from particularly self-interested associations pushing an agenda that is not necessarily based on fact,” he said.
Since the release of the Life Insurance Framework, Mr Johnston has issued a series of comments hitting out at the reforms and how they will adversely affect non-aligned advisers and business owners.
Taking this message to Assistant Treasurer Josh Frydenberg, Mr Johnston also submitted an alternative proposal for reforming the life insurance industry.
This reform proposal, which had similar elements to the FPA’s ‘Life Insurance Blueprint’, called for the first-year commission rate to be left at 70 per cent and the clawback period to be reduced from three years to two.
While the AIOFP is yet to receive an official response from Mr Frydenberg, it is understood by ifa that one will be provided in the near future.
The AFA was contacted for comment, but the association was unable to respond by deadline.
I would think that relationships would be strained Mr Johnston as this is probably the most cynical act that the life co’s have performed in decades. They have taken the support of the Libs via Minister Frydenberg and run with it.
One question though – does anybody think that the potential sale of MLC to Nippon Life puts key FSC drivers NAB in a conflicted position in this negotiation?
Can anyone confirm whether the Minister has factored this into the “negotiation” he has facilitated?
Starting to look a bit embarrassing for the young Liberal Minister if he has overlooked this