The AFA recently released its response to the interim report of the royal commission and expressed how grandfathered commissions were a complicated issue.
AFA chief executive Philip Kewin in a statement said there was no evidence of grandfathered commissions being the cause of bad advice.
“We have continued to argue against this proposal on the grounds that there have been no case studies identifying grandfathered commissions as a cause of poor advice and a lack of research on the nature and extent of the grandfathered commissions issue,” he said.
Mr Kewin said that the AFA would work for its members and stand up against the royal commission on the issue.
“We have seen no evidence of anyone being willing to stand up and challenge what the royal commission have said on this issue or the recent announcements. We believe that we need to do this and have set out in our submissions a range of issues where we believe that clarification is required,” he said.
Mr Kewin said that while the interim report had not made any recommendations, it was clear that financial advice would be at the forefront of the final recommendations next year.
He also reinforced the AFA’s support for life insurance commissions, stating that reduction of the caps for life insurance or total removal of commissions would be detrimental to individuals.
“As none of the hearings highlighted any systemic issues created by the availability of life insurance commissions, we are not sure why they have again come under the microscope, particularly given the recent introduction of the Life Insurance Framework,” he said.
The AFA also announced that it had recently submitted an expression of interest to ASIC to become a code monitoring body for the industry before the new rules kick in in 2020.
Code monitoring bodies will not advocate for the value of financial advice and will not provide professional development or the networking opportunities currently in place.
All financial advisers will need to belong to a code monitoring body by January 2020, with membership being a legislative requirement and not a replacement of a professional association membership.
These organizations are going to be in financial trouble over the coming years. With the Japanese buying three wealth businesses in Australia the question is will Dante De Gori be learning to speak Japanese in order to continue to be their puppet? Time these organizations realise that AMP and CBA can look after themselves, and that they have very different interests and they need to be listening to members.
puppets don’t need to learn to speak. they just need to know how to dance to a tune.
dance monkey dance
This is why the AFA is closer to being a union body protecting the rights of its members than to being a professional body. Those fighting to protect commissions are doing a great disservice to this industry.
they are bringing some real life common sense to this industry as the lawyers, politicians and left wing consumer groups are doing their best to destroy an industry without understanding the unintended consequences.
Outstanding. This is why our firm cancelled its FPA membership and we moved to the AFA.
That is exactly what my firm did! We have 3 planners and we did not renew our FPA and joined AFA.
Well Done Phil Kewin, a good move. Now, if you can get the likes of FASEA and the govt to treat Risk Specialist Advisers with a more appropriate exam and qualification regime compared to full investment planners you will be making real progress where the life companies have failed us miserably. Absolutely nobody is making this distinction and it will drive many experienced riskies (like me) OUT of the industry unnecessarily. Get to it Phil and show you are as good as you seem to be. This is grassroots stuff that the AFA should concentrate upon. No way is any self respecting 55+ year old risk specialist going to take dozens of hours away from clients, business and family and pay $10K+ just top pass some ridiculously irrelevant inappropriate exam to get unrelated qualifications and ‘degrees’ compared to risk planning. So ‘ludicrous’ that Elon Musk would be impressed!
Those that are serious and professional would, you may not…
The AFA argues that there is no case for removal of commissions, actually I think they say no evidence . I am sure the 9 million dollar fine handed to Financial Circle had insurance commission written all over the issue. Nil commission should mean more people can afford insurance as the long term costs would be less, lets see some real life figures , With some facts we can have a logical discussion at the moment it seems the people selling commission based products are about protecting the honey pot.
Clearly a misinformed comment. Are you honesty comparing grandfathered commissions to a company that marketed themselves as a loan shark and then said you can have money provided you take out insurances and change your superannuation to a retail fund for a fee?
Ian’s time in the sun (and his perspective clearly) is long since over. He just hasn’t realised that yet. What a silly post he has written.
I think the fact that insurance premiums reduce ONLY 30% on a 100% dial down of commission is proof costs won’t go down sufficiently. If companies can show a 100% saving to the client which won’t be made up by premium rises eg. random 12%+ premium rises across the board, THEN the discussion is appropriate. Otherwise it’s the companies pocketing the money and advisers having to charge clients a fee which they may not be able to afford. If the premium isn’t dialed down 100%, it is likely the client will be paying more for advice. But hell, the Insurance company’s profits look better with the extra funds they’ll be pocketing so happy days.
I’m all for ‘fee for service’ and plan to move to that model in the future regardless of whether commissions are removed or not but while it will make insurances cheaper long term it will make it more expensive short term. The plan fee’s charged will forbid many Australians from being able to afford the advice for insurance. Then those that don’t take up ongoing advice will be left to either pay an hourly rate for claims or go through the claims process on their own.
Or hand over 40% of their claim proceeds to ambulance chasing lawyers
Ian, based on factual evidence your comment doesn’t add up.
Direct Insurance (distributed directly by Insurer), and Group Insurance (distributed via super fund) don’t pay any commissions. Yet in many cases they are no cheaper than Retail Insurance obtained by an Adviser.
(Granted that sometimes Group is cheaper, but this is not always the case, and the policy terms under Group are often weaker too – you get what you pay for).
It is more likely that Insurers simply don’t like the competitive pressure that goes with servicing clients through advisers. For example, ASIC Report 498 finds that Retail policies get the best payout ratios at claims time, ahead of Direct and Group.
Ian Bailey your example is nonsensical and one has nothing to do with the other. Your comments here and on other forums, including BFP, are uninformed, one eyed and just simply incorrect. Try expanding that narrow mind enough to let a few other ideas fall into that empty space.
We have been exploring not taking commissions with insurers, at this stage when loadings mean we would get more, and it does NOT make the policy cheaper for clients – the insurer pockets as extra profit.
every client I have talked to regarding risk advice prefer commissions over fee for service (and yes I give them the option). They opt for this as adding an upfront advice fee usually makes the premium in Year 1 (and subsequent years) more expensive.
Perhaps you want nil commission that the client can get this from the call centre with no advice… now that would be fair wouldn’t it!?
AFA and FPA please don’t do anything on ‘behalf’ of advisers. anytime you do, it turns into a disaster, the whole of the industry is a catastrophic disaster, a shambolic mess and you are responsible at least in part, along with the FPA. I blame the industry representatives most of all.
we have to form or join a union to demand most of the rights that’s already enshrined in legislation and enjoyed by other Australian citizens namely:
a. not being subject to constant bullying and intimidation
b. not being subject to permanent defamation and intimidation constantly
c. subject to the presumption of guilt without due process
d. threatened with an inability to trade and earn a livelihood
Finally…advisers are realising that when the FPA goes to Treasury that Treasury and the Government straight away thinks they are the voice of AMP/CBA etc and not Financial Planners. It ain’t rocket science advisers. The biggest achievement of the FPA in the last 20 years is getting advisers to be able to witness Stat decs. Great work there.
Let’s imagine for a moment what happens when an Lobby Group that gets a third of it’s income from a firm such as AMP and they go to a Labor Government and say we disagree with Opt in…what’s going to happen? Or How about a lobby group that gets a third of it’s income from CBA and they go to Government and they say we disagree with FASEA…what’s going to happen? Perceived conflict or actual it’s the same. Wake up advisers…join the revolution.
which revolution? resigning from membership of these two or going on a hunger strike in front of nsw parliament ?
Good on Phil Kewin @ the AFA for standing up to the avalanche of anti-adviser rhetoric. Yes, we have seen example of poor conduct from licensees and advisers and there is no excuse for what we have seen. However the Royal Commission was set up to highlight the “bad” with no counter-balancing the “good”. What I want to know is why there is no focus on how the industry funds use member funds to “donate” to their union sponsors and ultimately the Labor Party. Where’s the disclosure?
Correct Jason, there is agreat article out highlighting how the RC was a predetermined political exercise, and that they purposely let ISA funds go without any real examination (with a simpleton left to ask the questions while the pointy arses who grilled the banks took the day off). Reflected completely by ASICs blatant declaration it had not and no intention to really investigate ISA at all, again with the RC questioners letting that idiotic statement slide through to the keeper.
Well said AFA!!!
every little ISN (leftie) assault imaginable will be visited on the FP businesses – hard to imagine such a free reign without controls being given to a lawyers picnic (RC) (smash the insurance offering, mandate new education standards – get to pay for your own regulatory body (first in the country) removal of ability to service low value clients – dramatically raise the cost of production – I would be happy if I was on the other team on how to destroy our business model job well done really – on the other side of the equation there are those within this industry that deserve nothing less
– one thing is guaranteed – if you present the opportunity to let other people decide your fate – well – what else can you expect.. Sad to watch a slow moving train wreck.
Good on you AFA, your organisation are definitely listening to its members unlike the FPA who are spineless and do not have its members interest at heart as Neil Kendall told me personally ‘our primary role is to look ter the public’. That’s why FPA you have lost respect and credibility with your members including me. Keep up the challenge AFA and informing Hayne and the RC needs to keep grandfathering as is.
Life insurance sales is already on the decline, and as the effects of LIF begin to bite (along with increasingly more fraught underwriting issues) I can see things getting worse NOT better.
Its the indecent haste with which so called reform is being implemented that concerns me the most.
I guess we will just have to suffer the slings and arrows…….
Here here. A balanced argument is required to offset the vested interests of the bank PR machines to support removal of grandfathered commissions.
Turns out time travel is possible, evidenced by this voice from 1982