The FPA has remained resolute and will focus on the “formal” Financial System Inquiry, in the face of questions from the advice community over its decision not to partake in the FSC and AFA-led Life Insurance and Advice Working Group (LIAWG).
“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.”
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