The AFA has said that the refinements to the clawback provisions, which have been reduced to two years, will be “received with relief by their members”.
“In an electronic poll held at our recent National Adviser Conference in Cairns, our members indicated almost unanimously that three-year clawback was the greatest issue in the reforms,” said AFA national president Deborah Kent in a statement.
“That was consistent with the view of our board. To succeed in having this reduced to two years is a great relief to our members, particularly those that own and operate small businesses.”
Also welcoming the government’s announcement is the FPA, which said in a statement that it commended Assistant Treasurer and Minister for Small Business Kelly O’Dwyer for consulting and listening to the profession and addressing the industry’s concerns, which derived from the earlier LIF announcement in June.
“The FPA supports the need for a model that enables financial planners an appropriate amount of time to transition. We believe that the staged approach to the new commission structure achieves this,” said FPA chief executive, Mark Rantall.
“The FPA also believes that expanding education, strengthening enforcement and removing other conflicted payments, including volume rebates and payments, is necessary to the overall package of initiatives.”
Meanwhile, the Financial Services Council (FSC) has said it welcomes the reforms and an ASIC review in two years. However, it believes more refinement will be needed in the longer term to improve consumer outcomes.
“If consumer outcomes do not improve, the government has given a clear commitment to implement the Financial System Inquiry’s recommendation of a level commission model in 2018,” said FSC director of policy, Andrew Bragg.
“As the financial advice profession matures, we expect all financial advisers to move to a fee-for-service model.”
The Best Interest Duty under FOFA has already solved these problems and as Trowbridge himself said “the resposnibilities of advisers are unambiguously clear”.
If there is still a problem it is because the law is not being enforced and this is an indictment on licensees, Professional organisations and the regulators.
Andrew Bragg has now made it absolutely clear as to really what the FSC’s intentions were from inception.
On page 4 of 11 of the FSC’s Submission to Trowbridge Review of Retail Life Insurance dated 5th Feb, 2015, the FSC recommended a “move to a level percentage commission structure so that the upfront commission for life insurance advice is no greater than ongoing commission on an industry wide basis. This level should be lower than current market rates for level commission arrangements, for example in the region of 20 per cent”.
So, the FSC recommended only 20 per cent level commission, subsequently didn’t get their way (entirely)and within a couple of days of the decision Andrew Bragg is intimating to advisers that it wont be too long before it will be a fee for service model only.
Just like Sally Loane’s recent comments, again we have the FSC being reported as stating that consumer outcomes will be improved with more “refinement” (FSC speak for no commissions), but with absolutely no documented evidence, statistics or data by which to support this statement around exactly how the consumer will benefit. These are simply unsupported politically motivated statements with no substance.
Charging a fee for service for risk insurance advice does not define a mature profession. What defines a mature profession is a requirement to act in the best interest of your client, to be governed by a strict code of conduct, have a high level of education, ethics and compliance management and to clearly disclose and define the purpose of the advice and the remuneration received.
I know there are very key employees of members of the FSC who passionately know and believe this to be the case and know that for ethical, professional advisers to be remunerated fairly via commission is totally acceptable and in most cases, preferable. The FSC appear now to be very transparent indeed.
Its OK Nettie, I am sure the FSC is beavering away on its ‘Code of Conduct’ – must have a huge financial impact on them and will no doubt dramatically improve the quality of advice and its affordability.
Maybe the FSC members can lead the way on the banning of commissions by removing them from all their direct insurance businesses straight away. It is obvious they feel strongly about this and this is something very much in their control?
The AFA seems to have misinterpreted “3 years clawback is unacceptable” as meaning “2 years clawback is fine”. No it isn’t.
Best interests duty has already solved the alleged problem of churn and misaligned interests. There is no need to change the current one year clawback.
Would the FSC please tell us what the baseline poor consumers outcomes is so we all know what we are measuring. They have been brilliant in their rhetoric of ‘misaligned interests’ and ‘poor consumer outcomes’ but offer no substance for the comments. It’s a sad say if our associations believe this is the right outcome. I didn’t hear any noise about the value of advice and standing up for the huge majority of advisers who are being tainted by the flawed ASIC research.
Small adviser businesses have been sold out for the benefit of the banks and their vertically aligned models. This is about increased profits for shareholders, not increased benefits for consumers.