The AFA says the Life Insurance Framework bill is expected to progress through the Senate after the bill passed through the House of Representatives earlier this week.
AFA chief executive Brad Fox said in a statement that it is “looking forward to advisers having greater certainty and are keen to see elements of the life insurance reform package progressing”.
He said that, while remuneration is just one part of the life insurance reform package, it is a part that must not be underestimated, as changes to remuneration challenge business models and, in many cases, an adviser’s sense of identity.
“While most advisers understand that phased reductions in upfront remuneration from 2018 will be offset by higher ongoing remuneration, the change is still significant for many advisers,” Mr Fox said.
“Advisers need to work together as professional peers to learn from each other’s experiences about how to embrace different remuneration models such as hybrid and level commissions and fees.
“For most advisers, transitioning successfully will bring increased practice valuations.”
On Wednesday, Minister for Revenue and Financial Services Kelly O’Dwyer said in a statement the changes to LIF will significantly reduce the incentive for advisers to churn clients between life insurance products where there is no consumer benefit.
“High upfront commissions have been identified as a significant cause of poor quality life insurance advice,” she said.
“ASIC’s 2014 review found that in 45 per cent of cases involving high upfront commissions, the advice provided failed to meet the legal standard. This is unacceptably high.”
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