Pressure to amend the proposed Life Insurance Framework (LIF) is building, with Liberal Senator Arthur Sinodinos to lobby the government and a number of industry associations pushing to re-envision the controversial clawback policy.
In an email to a Synchron-aligned adviser – obtained by ifa – Senator Sinodinos expressed concern that some industry associations have backed a proposal which will negatively impact the financial advice industry.
"Given your representations about the impact of the mooted measures, I was after an indication of how many people may be affected in practice, noting that the relevant industry associations have backed the proposed changes," Senator Sinodinos wrote.
"I was then proposing to pass on the information to relevant people in government."
In an email to Senator Sinodinos, the adviser said the proposed LIF measures would be "unsustainable for advisers" and that more than 50 per cent of full-time life insurance could exit the industry if the changes go through.
The adviser asked his fellow advisers to contact the senator since Senator Sinodinos needed "critical mass" for the fight.
The adviser also planned to meet with Speaker Bronwyn Bishop to further the cause.
ifa also understands that two independent senators are concerned about how the proposed LIF may negatively impact advisers.
The Association of Independently Owned Financial Planners (AIOFP) has been vocal about the risk proposals and last week released its own life insurance commission submission which demanded changes to the clawback policy.
AIOFP executive director Peter Johnston said the FPA, AFA and the FSC have engaged in a 'good cop / bad cop' routine, selling out advisers in the process.
"The risk submission put forward by the institutionally-aligned associations to the minister has all the hallmarks of the political strategy used against the financial advisers with FOFA over the platform rebates," he said.
At the same time, AFA has clarified its positions on the clawback policy, which has raised the ire of many risk advisers.
AFA chief executive Brad Fox said the three-year retention period is a "blunt instrument" but has strong government support as a measure to deal with inappropriate product replacement.
"Over the coming weeks we will continue to apply pressure for clawback to apply only with replacement product advice and not situations that sit outside the advisers' control, like a client-directed lapse because of unaffordability," Mr Fox said.
"Shifting the burden of responsibility to the adviser where policies lapse outside of their control is unfair," Mr Fox said.
Mr Fox also added that the AFA is seeking confirmation from insurers that they won't apply clawback where the policy lapses due to a successful claim, for example of a life, TPD or trauma policy.
Mr Johnston said these moves by the AFA are too little, too late.
"We now have one of the institutionally aligned associations who participated in the engineering of the proposal to the minister now 'shares the concerns' over the details with advisers, 'particularly around the three year responsibility period for new business," he said.
"Perhaps they should have thought about this before they put their recommendations to the minister? Perhaps they should have sought adviser opinion before submitting the proposal?"
The AIOFP is now demanding the three associations that helped construct the proposal release it to the public.
"If the advisers' views and concerns were seriously taken into account, why was it not done from the outset? We can only assume that the proposal was heavily weighted in the institutions' favour and the advisers were disadvantaged," he said.
"We think the AFA members should be demanding that the AFA Executive come clean with the full original details of what they recommended."
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 15 Nov 2018We’ll lose advisers through FASEA but it’s necessaryBy Adrian Flores
- 15 Nov 2018ASIC flexes its muscles at independent advisersBy James Mitchell
- 15 Nov 2018FPA hands down $50,000 fine on Sam HendersonBy Adrian Flores
- 15 Nov 2018Adviser reviews critical to client retentionBy Adrian Flores
- 14 Nov 2018ASIC bans financial services representativeBy Eliot Hastie
- 14 Nov 2018Fintech should make advice ‘enjoyable’By Adrian Flores
- view all