In an article written exclusively for ifa, Synchron chair Michael Harrison called out the Liberal Party’s decision to introduce the Life Insurance Framework (LIF), which reduced adviser commissions by up to 50 per cent, following arguments that such a move would make life insurance more affordable and improve the take-up of policies.
“In reality, premiums have risen since LIF, which must only serve to prove those arguments false,” Mr Harrison said.
“Then there’s the new ASIC ‘industry funding fee’ purported to be in the region of $1,500 per adviser, per annum, due to be charged from January 2019. I have several problems with this. The first is the nomenclature – let’s call this what it is; a tax on licensees, who have no choice but to pass it on, and therefore, by extension, a tax on small business advice practices,” he said.
“The second is there has been no confirmation on exactly how much the tax is actually going to be. It is almost December and we are expected to start paying from January – how does a business forward plan for a tax as expensive as this (potentially around $750,000 a year for a licensee the size of Synchron) with such scant information?”
The Synchron chair argues that the Liberal Party has supported “myriad” initiatives that profoundly affect the ability of financial advisers to run businesses that can support them, their families and their staff and provide meaningful service to their clients.
“The Liberal government has made changes that mean you can’t make more than $25,000 in concessional contributions a year. To add insult to injury, the government has imposed a $1.6 million transfer cap, which limits the amount of money you can transfer to pension phase, although you can leave more than $1.6 million in the accumulation account and pay 15 per cent tax,” Mr Harrison said.
“In other words, if by some happy circumstance you have more than $1.6 million to retire on, the government will tax you.
“The Liberal Party government has done almost nothing over its successive terms in office to encourage or support financial advisers or the clients that depend on them.”
Mr Harrison believes Australian business owners once voted Liberal in the belief that it was more supportive of business than the Labor Party.
“As time moved on, business owners voted Liberal in the belief that while the Liberal Party was no longer overly supportive of business, to vote Labor would be worse,” he said.
“Recent times have proven that neither of these two beliefs ring true anymore.”
Michael is correct in that Frydenberg, who is now the Federal Treasurer got conned by the FSC. The cash flows on the LIfe Insurance companies at this point of the financial year have crashed around 34% on average YOY. Some of these companies may become insolvent or be merged.
Prices have risen so the whole basis of Frydenbergs pitch to the Cabinet has proved to be false.
It will now continue to decline and along with it the Federal Company Tax revenue and more pointedly the State Stamp duty revenue which is 10% of every Life contract.
The second issue is that the Liberal Party backed the wrong horse, and it has now got away from them and will in essence cut the advice industry in half.
Well done Josh Frydenberg for getting rid of 4,000 jobs in Victoria and a lot of them in his own electorate.
The third issue is that advisers will not write the business indeed not provide the advice, unless remunerated, and with less advisers which of course there will be, means a lot less revenue for ASIC.
The fourth issue is that ASIC sent a signal to the Industry with Dover fiasco that clear concise and readable SOA’s are out and its a full court press for 50 page SOA’s that fully cover the adviser.
“Did you act in the Clients best interest and generate a safe harbour”- you bet your sweet bibby I did! And what is more the clients get to pay for the ASIC over-reach.
So to summarise the Treasurer of Australia Frydenberg, did not listen to anyone and as a result in the coming election may lose his seat in Parliament as people are not altogether stupid.
He backed the wrong horse and of course he has not realised it yet but it will cost him his political career.
Still utterly unbelievable that [b]politicians need hold NO formal qualifications [/b]to be put in charge of a ministerial portfolio like, for example FINANCE. . . and pull a few hundred grand a year for sitting there UNQUALIFIED. The fact ‘some’ of them have a degree in an unrelated area is moot – the job description does not mandate a formal qualification. What two-faced creatures these sel;f-serving politicians are. [b]These are the abject clowns forcing US to get OVERqualified to be simple risk advisers![/b] This is Dad’s Army at its worst! Abbott and Costello don’t get a look in.
My god listen to the “woe is me” comments. All the comments are just as self serving as the politicians. Politicians didn’t stuff the industry you did. You all killed the goose that laid the golden egg and now advisers with little business acumen are crying because of it. Business is survival of the fittest and the environment that are in now will prove only the fittest will survive. We all need to move with the times rightly or wrongly. I look forward to the trolls.
tell that to the 400 Dover advisers who are now unemployed, and homeless and sleeping on park benches in public parks and beaches, like winos, unable to work. thanks a lot Icarus
Surely your taking of the high moral ground just confirms that you are devoid of any lateral thought processes. The liberals have dumped on their own constituency which just happens to be small businesses , which is the main point of the article. If a bird shat on you , you would probably think you were lucky
Don’t blame me, I voted for Kodos
I for one will NOT be voting LNP at the next election, the trick is who do i vote for ? certainly NOT Labor. so what i need is to see who is a) on my side politically (senate vote here) and b) who is more likely to listen to me as my federal member? .
as for all the BS around commissions, the only people who ever believed that reducing commissions would be in the customers beset interest are those who have no idea how to run an insurance company ….. oh right, that would be bankers and politicians!
the net result will be 1) increased (advice for risk) fees to consumers ( an SOA still has to be written) 2) higher premiums to boot, 3) lower profits and job losses as insurers see a continued decline in new business (let’s face it, it has become way too difficult to write new Life biz anyway) .
I do believe that one day (and that may be quite a way off) we will see some kind of settling down, but many good folk will loose their jobs, or businesses and many Australian consumers will be left to fumble their way through the maze that is direct insurance.
GPH, that was very long and probably uninteresting, which is why I suspect nobody read it or replied. keep it shorter and to the point in future.
Agree and appluad Synchron for publicly saying what we all are thinking, [b]but what is the alternative? [/b]Labor Gov under Shorten & Bowen – both ISA stooges – will ensure the utter destruction of our profession. Voting for a minority doesn’t help unless there was one specific group sympathetic to our cause, and there isn’t (is there?). Donkey votes are suicide. If anything you need to be contacting your local LNP MP and unequivocally stating your thoughts to ensure a message is passed back.Besides, don’t forget Turnbull was essentially a Labor plant (‘rejected’ labor application so joined Libs, suss much?) and he was in charge of most of our current issues.
I agree Mr Harrison and will be voting Labor for the first time ever.
But I have an open question for you, IFA, ASIC and the FSC.
As a risk adviser I have been shocked by the corruption surrounding the LIF.
My questions:
1. Post LIF being introduced ASIC admitted that “churn” was in fact only confined to a very small number of individuals (no doubt the only ones they targeted in report 416) once they had received the lapse data from the FSC members. Why did the FSC members hide this information prior to the LIF being introduced?
2. Since the LIF has been introduced all of the FSC members have been raising premiums for existing customers and reducing premiums for new business only. As an example I would highlight MLC this month. In November MLC introduced a 10% discount for new business. This week they advised that JUST BEFORE CHRISTMAS they are writing to existing customers to advise then of a 10% increase in premiums. The same has happened since the LIF with AIA, OnePath, Zurich, Asteron, AMP etc, etc. All of the FSC members.
3. My question to you and ASIC. Existing customers who have now seen 10-30% increases on their premiums since the LIF. Do we now “Churn” them to new business premiums now heavily discounted by the FSC members? Do we not churn them and risk not acting in their best interest? Are the FSC members now actively encouraging a churn issue that was not their in the first place with these blatant tactics and why is ASIC not doing something about this?
I look forward to a response but I won’t hold my breath about getting one from ASIC or the FSC. We cannot rely on the AFA or FPA to highlight this issue but I hope that IFA and people with influence like yourself Mr Harrison start screaming for answers.
Anon, that was very long and probably uninteresting, which is why I suspect nobody read it or replied. keep it shorter and to the point in future.
The number of likes would prove your sad cut and paste comment incorrect.
Why are we arguing with ourselves? The score will even up!
Update. BT sending happy Christmas letters out tomorrow with another 10% increase in premiums for existing customers only.
Do what I did, give your LNP member a call and discuss issues with them. The only issue is that are now unelectable so probably do not care. Turnbull and O’Dwyer will be remembered for their incompetence, ruining an industry, drive small business out and destroying jobs.. I’m sick of this crap
LNP & Over Complicated ODwyer have:
1) [b]butchered superannuation[/b] with most complex changes to Super in 10 years because she didn’t consult industry before changes. Some right policies with some incredibly costly, complex, stupid implementation.
2) [b]LIF[/b] reforms to life insurance to cut Adviser income and make their life harder based on the now ASIC proven almost non existent problem of Adviser policy churn. ODwyer did this so the institutions could flog more dodgy direct life insurance. Look at this direct life insurance disasters at the RC.
3) [b]Independent Adviser definition[/b] the most restrictive in the world to make real non bank owed or run advisers look the same as bank owned advisers. Again the RC is showing how bad the banks manage Advice but ODwyer kept giving them biased support.
4) [b]FASEA[/b] is correct education needs to rise but the pig headed and sheer arrogance of ODwyers / LNP approach is beyond belief to many highly educated and highly experienced Advisers.
I am seriously looking to join the Finance Sector Union and vote Labor.
As a life long liberal from a family of life long Liberals, ODwyer is making me think of changing.
5) [b]CIPR[/b] Lifetime retirement product ODwyer and Treasury have developed are going to be some of the most complex products combined with seriously complications for estate planning and they think these should be sold over the phone without advise.
These LNP morons deserve the election wipe out coming there way !!!!!!!
Anon, still very long and probably uninteresting, which is why I suspect nobody read it or replied. better to keep it shorter and to the point in future.
Then you have that viscious dog they let off the leash named Kelly O’Dwyer who added more red tape, regulation and cost to the advice industry – I honestly believe that a Labor government would not have even caused this much chaos if they were elected. At least Bill Shorten is after the Big Banks but Kelly O’Dwyer was after small advice businesses that couldn’t defend themselves!
All valid comments and it is sad to see the Liberal Party thinking of themselves 1st not the working nation. But do we really want Bill Shorten running the country. He is as his initials state full of BS……
Vote for the independents at least this throws more voices into the mix and maybe the parties will look after the people that used to vote for them
100% agree
As a person (and adviser for the last 11 years) who has ONLY voted LIberal since turning 18, they have absolutely failed me in every possible way the last few years.
And yet they send me emails asking for donations. You must be joking. What goes around, comes around.
Couldn’t agree more want people to be self funded but add 15% tax on the earning on TTR pensions must be the biggest tax grab in recent history without hardly a blink of an eye from consumers as most don’t have a financial planner who explains this stuff to customers so they are just don’t know
Ignore the propaganda. LIF was always about just one thing – three years ago the banks realised that owning a life insurer was not the cash cow it “promised”. But the only folks interested in buying a shop soiled insurer lived overseas. So to dress up the old girl, the banks sold the Govt a lie that churning was a problem, helped by false info from ASIC ( As revealed by Kell at the PJC). Answer- promise the new buyers that new business introduction casts ( commissions ) would be halved in 3 years, aided and abetted by a so called small business LIBERAL government. The bonus was that the purchasing insurers could sell products direct without advisers, helped by rorting the GENERAL ADVICE regime. However, I now expect the RC to ban or severely limit the sale of insurance under GENERAL ADVICE to provide some protections for the great unwashed consumers. If not, we have just wasted $80 million on the RC. Oh, then there is FASEA, designed to replace diminishing income from overseas uni students with 20,000 advisers spending $20 k each, for no demonstrable client benefit.
I for one will not be voting Liberal !!!!
jsut liek paris people need to stand up.governments all about helping their mates. screw small business. why don tthey have royal commission into politician spending. their huge salaries and junkets. helicopters. side businesses. what about the under handed deals with developers and big business mates forget about them ay. there should be tax audit on all politicians by forensic accountants to see how they generate obscene sums of wealth in short time. rotten fish at head.
Yep but what has the advice industry done to help itself in the last 6 years???? ZIP. We’re still happy for the FPA to be getting payments from companies before a Royal Commission. Maybe we should look within?
we sat around paying annual subscription fees to our representatives at the FPA and the AFA, who have all enjoyed nice salaries and continue to enjoy nice salaries
i wish i could sit around tweeting for a $400k annual salary and doing nothing and then not being held to account for doing nothing. good gig that is
Kelly O’Dwyer’s utter incompetence and continued, repetitive rhetoric about enhanced consumer outcomes resulting from the LIF were baseless and unfounded.
If Life Insurance premiums are increasing year on year at 15-25% per annum for some clients and the insurers are paying less and less commission, how is this a good outcome for the consumer ?
The insurers cant argue they are now paying a higher renewal commission as it has only been in action for 12 months and they are increasing the premiums through the sky on older policies that may only be paying a renewal commission of 5, 8 or 10% only.
This is a grab for profit at the expense of the consumer and the adviser.
Less consumers will be able to afford Life Insurance and less advisers will be able to afford to deliver the advice necessary.
Great work Kelly and the Liberal Party…..you have done a job on everyone.
These observations are sad but unfortunately true. They take the continued vote for granted believing that by being the lesser of two evils they will continue to receive the vote. Now we have this completely non nonsensical disclosure regime that leaves many except for the lawyers in a total state of confusion. And this is supposedly a Pro small business party. They know little of small business.
The only reason I voted Liberal last time was to protect my business from Labor and gee that has worked out well….I am looking at what I can salvage now and how to clear the debt from the business I bought several years ago and then whether to spend 30k on new FASEA training…either party going forward it just looks as though I will be trying to give my business a death with dignity whilst watching the Big4 and Industry Super take over.
Industry is totally fuked
so true, there are already probably a couple of hundred advisers now homeless. a lot of them were struggling already and so when Dover shut down they all lost their livelihood. it’s a tragedy
So that’s why when I walk around the CBD instead of the homes asking for a dollar and/or flogging ”the big issue”, they are running around with FSG and Fact Finds….
I can see now why “Donald Trump won the presidency” The governments in Australia do nothing to help small business and on top that they have caused the cost to service in business like financial planning to make it hard for the average person to get help and advice. I detest the political parties who have crushed the small business sector in this country and if labour gets in it will get worse. We can only hope that the population like in the USA wake up and see these mainstream parties are useless.
Liberals turned into a bunch of bureaucrats completely aloof from the reality of small and medium businesses. Hope they get the sever lesson they deserve in the next elections
Couldn’t agree more, so disappointed in the LNP and don’t get me started on Over Bloody Complicated O’Dwyer, the worst politician Advisers have ever seen, LIF, Highly restrictive Independent adviser terms, FASEA and the most stupidly over complicated Super reforms ever.
What a bunch of complete morons, destroying small business and Advisers.