Minister for Revenue and Financial Services Kelly O’Dwyer has provided more information on the soon-to-be introduced LIF reforms, including a new deadline for transitioning advisers and the status of the so-called ‘direct carve-out’.
According to a speech transcript by Ms O’Dwyer, to be delivered at the AFA conference in Canberra, advisers will have until 1 January 2018 to transition to the new remuneration structure under LIF.
Ms O’Dwyer also confirms in the speech that there is no carve-out loophole in the reforms that exempts direct life insurance channels from having to follow the same rules.
“These reforms cover all life insurance sales involving advice — regardless of whether it’s personal advice or general advice,” Ms O’Dwyer says.
“There is absolutely no ‘carve-out’ for direct sales and the government will ensure that future sales methods designed specifically to avoid the reforms will be captured, including those where no advice is provided to the consumer.”
Further, Ms O’Dwyer says the LIF reforms do not favour one part of the industry over another.
“The government has listened to concerns raised by business large and small. I’ve met with many financial advisers, I’ve read your correspondence and I welcome the engagement that I have had with the AFA to improve the package,” she says.
“Ultimately I believe we have found a good middle ground — one where all sides have made compromises and where the consumer will benefit.
“The AFA advocated effectively on behalf of advisers, and many of the changes, such as moving from a three to a two-year clawback, expanding the legislation to nil advice sales and a single implementation date for all advisers are the result of their ongoing strong engagement.”
AFA chief executive Brad Fox said the new start date of 2018 will allow self-employed advisers more time to prepare their businesses for the significant reduction in initial commissions. It will also force employees of direct life insurance models to come under the regime of commission caps and extended clawback from the same start date as other financial advisers.
“It has taken consistent, clear advocacy by the AFA on behalf of self-employed financial advisers to ensure that direct sellers of life insurance measure up to the standards expected of professional members of the AFA under the life insurance reforms,” he said.
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