In a strongly worded letter to members, AIOFP executive director Peter Johnston said he will be asking Assistant Treasurer Josh Frydenberg to consider an alternative solution in which all stakeholders are considered.
“This proposal reeks of institutional manipulation by associations that are heavily influenced by institutional presence in their membership and executives,” Mr Johnston said.
“The AIOFP will argue that the FSC and FPA executives are too heavily involved with potentially conflicting institutional membership relationships and are too far removed from operating an advice practice to offer a pragmatic workable solution.
“We can no longer rely upon associations to stand up for the advisory industry if they are held captive by the Institutions,” he said.
Mr Johnston also said the proposals are a “typical institutional centric approach” that fails to address a number of challenges for small business owners.
“[For example,] product failure and the injustice imposed on advisers: this issue has been spun and twisted to emerge as an adviser-driven problem and the Institutions are innocent manipulated bystanders,” he said.
In the suggestions which the AIOFP will put to Mr Frydenberg, the association will be looking to lock in benefits for consumers and to create a commercial environment so that “advisers can survive”.
Members of the AIOFP are encouraged to submit their thoughts by 11 July, before the association takes its suggestions to Mr Frydenberg.
[quote name=”Leo”]Reality- give Adele Ferguson the details. At least something will happen.[/quote]
haha – I will pay you on that one !
Reality- give Adele Ferguson the details. At least something will happen.
[quote name=”Reality”]There is a direct correlation between big business and these bad advisers anyways…
I know a practice that will remain nameless under a large dealergroup where they regularly provide advice without an SOA etc… No best interest etc… Big trips all expenses paid because the advisers flog products…
That practice had their annual audit the other day… Passed with flying colours. You bet the dealergroup knows what actually goes on but just covers their tracks to keep the money coming in. I am sure if the dealergroup put their foot down the advisers would stop but instead they encourage.
Absolute disgrace.[/quote]
Does sound like an absolute disgrace. Why don’t you let ASIC know rather than tut tutting on the internet so that it can actually get resolved? Do all of us hard working advisers a favour and start the ball rolling, because comments like that with no follow-up are just more damage to the rest of our reputations.
I have advised an Accountancy relationship that we will not be taking on any new clients post 1 January 2016 due to the 3 year contingent liability. An unacceptable situation which is unworkable!
How can this outcome be in the clients best interests?
Time for change,
Trust me, I agree with you 100%. All I am saying is when everyone is aware (including the regulator) what else can be done? This once again gets back to management obviously having incentives tied to revenue which this practice is currently generating for them so they will stop at nothing to keep it going.
If ASIC actually did their job this would be a cakewalk. Spending one day in a practice like this would be enough to determine the serious compliance issues. That doesn’t happen.
Just all falls of deaf ears.
As others have pointed out, the changes have NOTHING to do with better quality outcomes for the clients.
The entirety of the exercise was to transfer money from small business to big business, from advisers to providers.
Beyond the wishy-washy vague intentions to improve advice for the client, there has been absolutely NO meaningful case put forward as to how clients are better off.
The providers pocket more money and will not pass on savings via premiums to clients. Provider profit increases are a transferring of wealth from advisers, who will now provide less insurance advice. Underinsurance gets worse. Advisers can pass the costs onto clients, but that means clients bear the impact of the provider money grab. Either they pay more or won’t be insured. Loss/Loss for the clients. Somehow Trowbridge and the providers argue that if advisers receive less income, the quality of their advice will improve, but have never bothered to suggest how this is meant to happen.
The providers and our professional bodies are now telling us to ‘face this challenge’ and become better at selling in order to get the client to bear the cost so the provider can benefit.
Reality, I understand your position. But one of the positives ways that we, as advisers, can demonstrate our integrity and passion to improve our universal perception is to actively show that we have no tolerance for bad practices whether those practices be at adviser, licensee or corporate level.
We have to show no bias to friend or foe. If the BDMs are aware of the bad practices you talk of they have an obligation to raise it with their compliance and senior management. If you don’t get action from the licensee as you indicate you must take it directly to the regulator.
We should be seen as the compliance and client best interest guardians and not rely on licensees etc as they may santitise the causes to protect their brand. Some licensees are excellent at no tolerance but sadly not all are. The bigger the adviser the greater chance they have of receiving tolerance, particularly in the VI world. And that’s just not acceptable.
some great comments. As we look back and reflect on the last few months, I dont see it has provided a solution of benefits sought. However, destructive it has become. I give extended time and empathy freely. I am compassionate. I am there in the lineup after the funeral. I am the only one with the cheque. Good kind words from the others, but their account will come. I assist those in tough times. Now I am to start a new career and have my 15 minute blocks? Run it harder and ensure profitability. This is a real “cost” to the consumer. What most fail to understand is that we are in a special industry. Often we carry emotions with our clients, just like the funeral director. Dont put us in a basket and restrict our special abilities.
Maybe we should get Bill Shorten to negotiate an E B A on commissions between the life companies and the advisers through the AWU, don’t know how much it will cost?
Peter Johnston is exactly correct along with every other response received to this point relating to this article.
Conflicted, colluded, manipulated, influenced and the misuse of market power are other words that come to mind.
It was entirely negligent for Josh Frydenberg to threaten the industry with a short time frame to determine an outcome demanding such detailed process and analysis. To threaten an industry that “weeks not months” was the available time frame is unacceptable and irresponsible on every level.
This gave rise to a panicked situation where the institutional power players saw an opportunity for reform that would suit their business model and maximise profits to the detriment and destruction of small business. Josh Frydenberg would have been instructed to “get this off the table quickly”, because the Liberals could not afford to expend any more political capital on this issue after botching the FOFA process.
To think that the catalyst for this outcome was the entirely flawed ASIC review based on skewed data and a sample size representing only 1.2% of the total number of Financial Advisers in Australia (est.18,000), is unacceptable.
The proposed framework will not stop poor advice, will not benefit the consumer and will not assist in reducing the underinsurance problem.
What it will do is to significantly damage the businesses of quality risk insurance advisers who provide high quality advice to consumers and assist in educating the public in the enormous benefits of implementing financial security strategies.
System interrupt, I do not work for the dealergroup and the necessary bodies have been made aware and nothing has come from this.
I can only assume that the dealergroup ‘cleans’ the compliance records so the gravy train can continue.
Any BDM I speak to from any company knows this practice is a big issue but they make plenty from the churning occuring so do nothing either.
Much of the current changes could be avoided by ASIC actually investigating these practices.
Reality, there is no point telling us.
If the situation is as you state the you should jointly address your observation to the regulator and the licensee.
We expect that employees should take advantage of their employers whistleblower policies and we should do the same for the good of all advisers.
Write to them today lest we are accused of hiding bad practices.
If The Liberals don’t win the next Election would they be prepared to pay back their parliamentary salaries in one or two year’s time? No… then why do they expect insurance advisers to repay their earnings for the work done for the client???
There is a direct correlation between big business and these bad advisers anyways…
I know a practice that will remain nameless under a large dealergroup where they regularly provide advice without an SOA etc… No best interest etc… Big trips all expenses paid because the advisers flog products…
That practice had their annual audit the other day… Passed with flying colours. You bet the dealergroup knows what actually goes on but just covers their tracks to keep the money coming in. I am sure if the dealergroup put their foot down the advisers would stop but instead they encourage.
Absolute disgrace.
The common thread in this and other articles, and comments, is that it is about time the institutions came under very close scrutiny. Sure we have some less than ethical advisers but they are so much in the minority that they do not affect the great value that the rest give to their clients. Unfortunately advisers have been and remain very much at the mercy of institutional manufacturers and licensees past and present behaviour, product structure, pricing and processes. The poor adviser is the easy target.
I read TAL’s announcement of their investment in their “customer service” but they ignored the elephant in the room that they, and the other manufacturers, have almost zero recent face to face end client experience, if any, and develop products, servicing and pricing based on their balance sheets and the necessary narcissistic personalities that are needed to survive in corporate.
If you want to fix something you need to fix the root cause and not just bandaid the odd cut and scratch. There are some very intelligent and valuable people in corporate but they all have mortgages and families so are unlikely to bite the hand that feeds them to drive obvious change. Who will be the first brave institution to take the first real step?
“This proposal reeks of institutional manipulation by associations that are heavily influenced by institutional presence in their membership and executives,” Mr Johnston said.
THANK YOU MR JOHNSTONE, finally the truth!
This is exactly what I posted a week or so ago. All the large institutions pay for their advisers to be members of the FPA or AFA and in return the FPA/AFA will do whatever they get told by the institutions, and if they don’t they will stop paying the memberships – its an absolute joke!
You then have the FPA and AFA telling us that their members feel its a great outcome and we all agree with the changes
Thankyou AIOFP somebody having a constructive defense for advisers who have been led to the slaughter house by big business including our associations afa and fpa, we need to deregulate the insurance industry and bring in international insurers so these Cartels FSC dont destroy the integrity of years of service to the industry by self employed independent advisers.
Good luck Peter.
For your information Josh Frydenberg is in Europe until late July. His office has advised me in writing that requests for meetings will be considered on his return.