The original reason the EGM was called was to clearly put the focus back on the LIF proposal and to let the current board know that a large percentage of their membership was not comfortable with the negotiated outcomes. I believe to that end we have been successful in contributing to the delay until at least January 2018 and buys us time to continue negotiating.
The AFA had emailed all their members, strongly encouraging them to oppose changing the constitution, but did not discuss the LIF legislation. To be successful, we needed 75 per cent of the membership to vote for the resolution and we were never going to achieve anywhere near 75 per cent with the type of internal AFA campaigning that was conducted.
As a result of the earlier discussions and knowing we were in a no-win position, I felt that by extending the olive branch with the new board we could get some traction and work together on achieving a better outcome for both consumers and advisers. I withdrew the motion and the proxy votes for what I believe to be the right reasons.
As we know the LIF legislation as it currently stands:
- Has zero benefits to consumers;
- Was initially driven by the FSC using a flawed Trowbridge report to deliberately deliver an outcome;
- Has no evidence for any of its measures being introduced in the first place;
- Is based on an ASIC report that the Senate committee judged to be inadequate;
- Has been manipulated by the FSC towards an outcome to benefit the product manufacturers, banks and life companies;
- Has been forced into being by the banks and institutions who only wish to further line their own pockets and wipe out the non-bank competition;
- Will see a reduction in adviser numbers;
- Will see the banks own and control the market to consumers. Look at how many bank-based financial planning failures, bans, apologies and fines have occurred this month alone;
- Income declining to zero, being the FSC’s goal to remove all adviser income; and
- Has a two-year clawback, meaning that all of us will be paying the price when insurance companies increase their premiums for consumers.
The FSC is attempting to take the fee-for-service currently being paid out of the products and passing that on to the consumer. This, on top of increased premium rates, means that the single biggest issue in our industry, that of underinsurance, will continue to increase. At a recent meeting, Geoff Lloyd, the new chairman of the FSC, made it clear that their plan is to remove commission from the product over the next five years. We believe this is an ideologist view and, for 80 per cent of Australians, how they currently are advised and buy appropriate life insurance will no longer be financially achievable.
My meeting with the AFA board members prior to the EGM did in fact give us a chance to try and find some common ground. Now that we have had the chance to discuss our concerns with the new AFA board members, I believe we should be working more closely together to inform the members, the public and the politicians of the detrimental effects of the LIF.
At the moment, the LIF totally favours the banks and insurance companies and, in its current form, will damage our industry and consumers. We need to work together to achieve a sustainable and competitive industry that will result in better outcomes for consumers.
We need to bring the LIF back into balance away from just benefiting the banks and insurance companies, and create a sustainable industry. It is my belief that adviser remuneration should be a hybrid position of 80/20 plus a one-year clawback. Our research shows that this outcome would bring equilibrium back to the market and result in a positive selection of advice solutions for consumers. Surely the AFA, FPA, FSC, advisers and the government can agree on this simple solution.
I hope to be able to work with the new board of the AFA and also bring to the table all of the research and evidence gathered by the Life Insurance Customer Group to demonstrate to the politicians how to achieve better outcomes for consumers by moderating the LIF and helping to keep the banks honest.
Mark Dunsford is a member of Life Insurance Customer Group. He is also the founding partner and director of NOW Financial Group.
Sorry Mark, I disagree with you. It was the Board’s responsibility to inform their members of their opinion on the resolution affecting the Association and its members. It wasn’t a strong campaign at all, it was simply addressing your call to change the constitution.
I was in the audience at the EGM, it was held fairly and every member was given the opportunity to debate your resolution. I am glad the motion was still voted upon despite you trying to withdraw it. The democratic right for both the for and against the resolution has been heard thanks to the Board. The membership has spoken.
It is such a shame that you did not stand by your convictions of your resolution that has been completely disruptive for the AFA and its members.
I have cancelled being a member of the AFA and nor would I ever want to be one again after seeing what a disgrace and embarrassment their leadership is.
It is clear they thought more of their egos and paymasters than for fighting for a solution to keep risk specialist advice alive in the future.
it is hardly a surprising result when the AFA have a higher proportion of FSC aligned and paid for members who are more interested in getting rid of adviser competition.
Without reaching a fair compromise the AFA leadership together with the FSC will be directly responsible for worsening underinsurance in the future and for seeing more customers having claims denied after being forced to buy directly.
Well done Mark
Why can’t advisers understand that if they want to stop being controlled by product makers/banks/life offices they should stop accepting payments from them? Just charge your clients for advice about what cover is needed, which products are best/better and why and become independent and incorruptible as well as respected for being the professionals you are? Imagine going to an antiques dealer expecting advice…you’d get sold what they had. But if you went to an antiques adviser they would provide guidance (but have no stock to sell) about what would be best for your needs and perhaps even accompany you to the antiques market, but would charge you a fee, regardless of whether you bought anything – because the best advice may be NOT to buy! The words “advice” and “adviser” should be limited to those who sell only advice, not product, as they were over 20 years ago when we had Advisers Licences and Dealers Licences. Bring back that policy and we solve all the consumer problems as well as the industry’s conflicted back-biting and embarrassing public brawling. No wonder there’s little respect for the arguments put forward by most industry bodies that pretend to represent us. I wouldn’t join any of them! I have my own AFSL and have been fee-for-service for 25 years and issue invoices to clients for all fees – as do all professionals. This getting paid by product issuers is so (early/mid) last century.
Mark your proposed Hybrid Model of 80/20 with a one year clawback is the only acceptable and logical outcome to ensure the ongoing viability of our Industry as we know it today. This would be a win for the consumer who will continue to receive the professional advice they need and deserve and it will mean the survival (albeit on very different remuneration terms) of thousands of small businesses. We need to all work together AS AN INDUSTRY to mend the soured relationships caused by the events since 26 March 2015. Put your weight behind Marks proposal and let’s see some commonsense prevail for everyones benefit.
well done mark dunsford. From one risk writer to another.
How on earth do you arrive at the conclusion that the solution to remedy the deficiencies in a piece of legislation is to create a rift within an industry body that was part of the consultation process, but expressed their dissatisfaction with the outcome?