A former Labor leader has joined forces with an industry association as it attempts to convince government to overhaul the controversial Life Insurance Framework.
The AIOFP has confirmed that it will be commencing discussions with senior FSU executives in the new year to present a business case for reversing the Life Insurance Framework (LIF) legislation. The association argues that the framework has the potential to “cripple the industry”.
“We also want to present our position on grandfathered revenue,” AIOFP executive director Peter Johnston told ifa.
“We will be building our case around what happened in the United Kingdom over nine years ago where the nation's underinsurance ratio dramatically increased when advisers left the industry, leaving the government and consumers exposed to the financial and social consequences.”
While LIF is yet to fully play out, Mr Johnston warned that premiums have actually increased for consumers. He pointed to the misconduct of many direct insurance companies, which were found to have sold low-quality policies directly to consumers by the royal commission.
“During our London conference in June 2019 a delegation of experienced risk members will be visiting various government and industry bodies to prepare a report for the FSU and ALP national executives by September 2019,” Mr Johnston said.
Former NSW premier and current FSU national assistant secretary Nathan Rees said the FSU will consult with the adviser members of the FSU and take their views to government.
“We will do our best to ensure a sensible policy landing once the final royal commission report is handed down. Ultimately the policy position should not benefit one group of providers over another,” Mr Rees said.
The Liberal Party has faced heavy criticism for its handling of significant issues impacting the financial advice industry and small businesses in general.
This week, Synchron chair Michael Harrison called out the Liberal Party’s decision to introduce the LIF, which reduced adviser commissions by up to 50 per cent, following arguments that such a move would make life insurance more affordable and improve the take-up of policies.
The Synchron chair argues that the Liberal Party has supported “myriad” initiatives that profoundly affect the ability of financial advisers to run businesses that can support them, their families and their staff and provide meaningful service to their clients.
“The Liberal government has made changes that mean you can’t make more than $25,000 in concessional contributions a year. To add insult to injury, the government has imposed a $1.6 million transfer cap, which limits the amount of money you can transfer to pension phase, although you can leave more than $1.6 million in the accumulation account and pay 15 per cent tax,” Mr Harrison said.
“In other words, if by some happy circumstance you have more than $1.6 million to retire on, the government will tax you.
“The Liberal Party government has done almost nothing over its successive terms in office to encourage or support financial advisers or the clients that depend on them.”
Mr Harrison believes Australian business owners once voted Liberal in the belief that it was more supportive of business than the Labor Party.
“As time moved on, business owners voted Liberal in the belief that while the Liberal Party was no longer overly supportive of business, to vote Labor would be worse,” he said.
“Recent times have proven that neither of these two beliefs ring true anymore.”
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