Following a strongly-worded statement opposing the “unworkable” Trowbridge report proposals last week, AFA chief executive Brad Fox is now urging the industry to address the issues by adopting new risk remuneration and advice quality controls as soon as possible – thereby pre-empting any subsequent official policy response.
“In light of the ongoing industry negotiations to reach a unified position for the future of life insurance, there is a clear opportunity for licensees to implement their own solutions, particularly in relation to replacement insurance advice and adviser remuneration,” Mr Fox said.
“Insurers, advisers, licensees and professional associations all have to carry their share of the load but no-one has to wait for the others to move first. Some clear industry leaders will emerge.”
Mr Fox added that many advisers and licensees have already started to move away from high upfront risk commissions in favour of “sustainable” hybrid models.
“I think it is totally conceivable that some licensees will seize on the opportunity to address consumer perceptions by mandating that their advisers accept no more than a hybrid payment,” he said.
“I would not be surprised at all if we see announcements from licensees mandating new standards ahead of an industry-wide solution being agreed.”
He also said that licensees are “central” to addressing the quality of advice concerns raised by the corporate regulator.
“Licensees will no doubt be taking a more proactive supervision role with respect to replacement product advice and there are simple yet effective ways for insurers to support licensees to do this,” Mr Fox said.
“Insurer reporting to licensees can identify unusually high levels of replacement insurance advice, and licensees can also identify advisers showing a surprisingly high preference for using a particular insurer,” he said.
[quote name=”Old risky”]Steve A
May I respectfully disagree with your comment about lack of collusion.[/quote]
My sarcasm must have been more subtle than I thought. Everyone knows that the petrol companies collude on prices – just as we all know that the insurane companies (via the FSC and the estimable Mr. Trowbridge) are colluding here.
As with the petrol companies, I’m sure the ACCC will find no evidence of collusion. Note the wording here – the ACCC never says that there is no collusion – only that it can’t find any evidence.
I’m also sure that this is only the first step towards level commissions – refer to Frydenburg’s comments today.
[quote name=”Gerry”]The majors will follow but I think some of the non-aligned groups will hold out for as long as possible, trying to attract advisers and preserve revenue. Not all the non-aligned followed the lead with higher education standards…some of them are still advertising for advisers with barely RG146 in place.[/quote]
I actually expected Clearview to be the first, given they came out shortly after the Trowbridge report release and openly stated that they were in support of a hybrid model
Gerry
Pls don’t generalize on risk advisers ( I do not care about generalists ) who hold PS146(RG)
I have 25 years of risk only experience, I hold PS146 plus Estate Planning
I’ll back myself against anyone who looks down their nose at risk only advisers with PS146
Your point is interesting. There is NO non-sales risk education being done by Insurers with the exception of TAL, and that might go if the FSC wins
The FPA is a joke on risk training. The AFA has abandoned its long held training courses, which started my search for risk knowledge. No university or TAFE courses of any value are available
And ASIC refuse to have different licencing for risk specialists
Risk advisers need specific training, devoid of other rubbish- why do I need to know the ins and outs of deriatives. We also need a risk only professional association
Steve A
May I respectfully disagree with your comment about lack of collusion
I have written to the ACCC, stating that in fact the FSC/ Trowbridge action is an abuse of market power by the FSC, insurers acting as you say in unison, t driven by the banks.
Advisers seem to forget that in the current system individual AFSLs can negotiate with individual insurers on remuneration. The insurers do deals on commission if the promise is big enough ( I Select was apparently asking for special deals ) on both commission scales and VOLUME BONUS
Under the FSC proposal, all individual negotiations are ELIMINATED by collusive agreement between ALL the retail insurers
That’s an abuse of market power by a cartel
And, as others have said, AMPs offer is just a stage on the way to the ULTIMATE GOAL of the banks – eliminate IFA advisers and sell GENERAL ADVICE scaled down products using Robo Advice. No more chequebooks and Senate embarrassment
The majors will follow but I think some of the non-aligned groups will hold out for as long as possible, trying to attract advisers and preserve revenue. Not all the non-aligned followed the lead with higher education standards…some of them are still advertising for advisers with barely RG146 in place.
[quote name=”Mervin C Reed”]Lets wait and see and if the other product providers do not change and they probably will not and follow AMP then watch the AMP cashflows crash and the AMP Board dump the executives involved in a brave and futile idea.[/quote]
Mervin – you are not seeing the big picture here. This is merely the first step in implementing the FSC’s agenda (as detailed in the alleged Trowbridge report).
Since all of the insurers are in the FSC, I would guess they drew straws and AMP got to go first. My guess is that all the others will make exactly the same announcements within 4 to 6 weeks.
It’s like when petrol prices go up before a long weekend. Some companies may wait an hour or two but they all put them up. Also like the petrol prices, I’m sure that even if the ACCC investigates, they will find “no evidence of collusion”.
Lets wait and see and if the other product providers do not change and they probably will not and follow AMP then watch the AMP cashflows crash and the AMP Board dump the executives involved in a brave and futile idea.
I thought it was a great start by AMP to switch to Hybrid models announced today. Bit surprised it came from AMP first, I expected some others might have jumped before them, but hopefully this kicks some of the others into gear and kills off the Trowbridge recommendations on adviser remuneration
I am with you on this one Old Risky.
I think they are doing some heavy lifting right now and not being given credit. These issues take time and we are only part way through. Not time to panic yet doomsdayers.
In saying that the time is nigh for both associations to work together and give Gov a solution.
as a member of 25 years, I have been critical of the AFA. I believe while Labor was in power, the AFA was seen by Shorten to be too close to Cormann and all of his “un-deliverables “. Then we used an ex Liberal polly as a lobbyist
The AFA went into the LIAWG ambush in good faith, but only one side was showing good faith. We were slaughtered by hidden FSC/banks agendas coated in consumerism, based on a flawed ASIC report. ASIC think upfronts are the cause of everything evil, so they did ” a Barwick” – decided on the outcome and worked backwards for the evidence
But that’s history – now we have to belt heads. I think we need to consult on tactics with a good, old fashioned, head kicking unionist that recognizes the FSC proposal as an ambit claim ( don’t bother calling it Trowbridges ) and negotiate UP to Hybrid and get on with business.
Goodbye Mum & Dads
Enough with the AFA bashing already, as an AFA member I’m pleased they are at least being pro-active on the matter and trying to make a positive impact where they can. Personally I see the Trowbridge report recommendations as quite reasonable apart from the proposed changes to remuneration which poses the biggest impact on us as advisers & business owners, so stop whinging and lets work together in lobbying where we can to get this aspect sensibly changed!
I must admit I am surprised at some of the negative comments below regarding the AFA. In my view the association have been front and centre at trying to ensure a positive outcome for Advisers. It’s disappointing that the FPA have been far from vocal on this issue given the significance. It’s easy to fire bullets from your keyboard. I wonder if the detractors took the time to provide a submission? I suspect not!
As advisers and independent business owners we need to be progressive with change and understand that upfronts are gone.
If we unite and get on the front foot to embrace a workable solution such as hybrids or a version of that ahead of any mandated ruling by government, surely that will be a step in the right direction showing politicians and the public that we are serious about making a difference and eliminating churn.
If we don’t do something we may regret what is done to us!
Of course “…licensees have already started to move away from high upfront risk commissions…” – they are also the product providers!!!
How the big 4 to control the industry is a joke,good to see Clearview make a stand as for the AFA, well done for doing nothing, I thought that was the sole purpose of the FPA but looks like you guys are even better than them, another reason to cancel my membershp
With due respect to Mr. Trowbridge’s efforts at a workable solution, as a risk adviser, I do not believe his solution is workable for the majority of risk advisers, & I support a hybrid solution, if changes must be made. I realise his brief was broader than trying to satisfy any particular stakeholder.
I am self employed, & the idea of a business plan compulsorily foisted on me where, by design, the cost of new business is more than the potential return, is quite unacceptable in a free market type of economy. I have never had a client complain that I was paid too much.
As to the churn debate, I believe there are a variety of reasons a policy is cancelled, not by the original adviser, e.g. by bank advisers, other advisers, direct insurances, genuine economic client situations, etc. & therefore the original adviser should not wear the mantle of churner un-necessarily, & therefore not need to incur the whole clawback. Others who initiate cancellations should wear the clawback.
Old risky, i’m guessing he is talking to those small businesspeople that actually control their own affairs
Not sure how this works. The larger licencees are owned by the banks & AMP.
They are hardly likely to abandon the FSC party line
I guess they’re giving up on the IFA! Well done AFA, your organisation has been a party 2 all this fiasco! If they were smart, they would have been able 2 out dodge the FSC,ISA, ASIC & all the senate committee politicians that have been out 2 decimate our industry for their own vested interests! Furthermore, if Brad Fox was serious about his disappointment, then why doesn’t the FPA & the AFA get together & appoint another Independent person of prominence 2 review the Trowbridge Report & come up with an alternative report into the industry. By having the AFA whinge & go out to the media about how disappointed & unsupportive they are of the Trowbrigde Report, they’re not going to get anywhere! At least if they have a Report/Finding by an Independent, prominent person, then at least there is a chance of bringing about the truth about the intentions of the Trowbridge report. They better be quick as the firestorms are in the distance! In the words of a great coach, “don’t just say..DO!