Industry fund lobby group Industry Super Australia (ISA) has voiced its concerns regarding the Trowbridge report, claiming it “fails to tackle” the conflicts caused by the “existence of commissions”.
In a statement responding to the recommendations made by the Life Insurance and Advice Working Group independent chairman John Trowbridge, ISA said the report was disappointing in its “failure” to consider the removal of commissions from life insurance.
“While the report’s proposals may deal with the most egregious situations of churn, it fails to tackle the fundamental conflict caused by the existence of commissions, even if capped,” ISA deputy chief executive Robbie Campo said.
“Conflicted remuneration structures are the primary cause of poor advice in Australia, featuring in every major advice scandal of the past decade.”
If allowed to remain, they will continue to undermine the quality of advice and insurance outcomes for clients,” she said.
Ms Campo pointed out that a transition to “phasing out” commission-based remuneration is the only long-term sustainable solution compatible with a professional financial advice industry.
Other options, such as allowing capped commissions only up to the value of advice provided, do not seem to have been seriously considered,” Ms Campo said.
"There is no evidence that sales commissions lead to or are necessary for higher levels of insurance coverage,” she said.
Ms Campo added that ISA welcomes the release of the federal government’s consultation on improving professional standards in financial advice.
“Industry super funds have long championed the raising of professionalism in financial planning, particularly the banning of conflicted forms of remuneration and the requirement for advisers to act in the best interests of their clients,” Ms Campo said.
“However, any consideration of the parliamentary joint committee recommendation to establish a co-regulatory model should not ignore the industry’s very recent resistance to any improvement in standards,” she said.
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