At a press conference reflecting on ASIC’s post-review findings of inappropriate advice yesterday, Mr Kell said that while the “failure rate is simply not good enough”, ASIC has no plans to recommend a change in the legal status quo.
“ASIC is not recommending or suggesting that commissions be prohibited,” Mr Kell said.
“Commissions for life insurance are allowed under FOFA – they are part and parcel of the life insurance industry.
However, at the same time Mr Kell reiterated the regulator’s belief that there is a link between upfront commissions and dodgy advice, putting the entire life insurance distribution chain “on notice”.
“ASIC’s message to the industry is clear: the industry needs to ensure that remuneration and incentive structures do not undermine good quality, compliant advice,” he said.
“The industry as a whole – that is insurers and advisers – need to ensure that the interests of clients are more regularly prioritised as part of the way this sector operates. And we’ll be working with the industry to make sure this eventuates.”
Meanwhile, Industry Super Australia issued a statement claiming the “damning” report provided evidence for an extension of the FOFA reforms, rather than a “wind-back”.
“The only logical response to this report is to extend the ban on commissions to include those paid on individual risk policies inside and outside super, and to withdraw from parliament the wind-back of FOFA until at least after the Financial System Inquiry has issued its final report,” said ISA chief executive David Whiteley.
Mortgage Choice also issued a statement welcoming the findings as “unsurprising” and arguing the report vindicates the ‘hybrid’ commission model.
“These findings further reinforce our decision to build the business model from scratch, so we didn’t have to change adviser culture and deal with any legacy issues,” said Mortgage Choice Financial Planning general manager Tania Milnes.
As usual too many vested interests twisting statements to suit themselves. ISA has nothing to do with individual risk policies and should therefore concentrate on their own business, but as usual they use their tactic of attacking planners rather than just promoting themselves. And Mortgage Choice, bashing other planners to promote themselves – unbelievable!!!
Some of those case studies sound like poor supervision by dealer groups, if they have one that is. A commission payment of like $15k should prompt a file audit. Big levels of risk writing should set off some alarms…..sounds like some compliance teams keep hitting the snooze button.
Very interesting the newest adviser into the market is having a say here, they deal with commissions and have come armed with a massive client base to try steal all the smaller business owners clients, they won’t need an upfront structure as they have an unlimited client base, i’m all for Hybrid, it’s all I recommend but you would think Mortgage Choice should stay out of this argument right now, they are mortgage brokers as a mainstream.
Notice Whiteley said “individual risk policies”?
He still wants to keep the bulk commissions on group cover for industry funds. What a hypocrite.
Industry Funds need to be scrutinized more – just look at cbus who has handed over confidential member info to unions. They supposedly forced an employee to deny/lie about it (under oath ), before she had a change of heart and confirmed that it actually happened.
If ASIC are serious about reducing conflicts, they should mandate that all clients are allowed to pay for upfront and ongoing financial advice from their super funds. That way, independent financial planners can price their service appropriately without bias towards any particular insurance company or super fund. At the moment we have this ridiculous situation where advisers cannot get paid if they recommend an Industry Fund super or insurance product. This is the greatest conflict of all and it is caused by the Industry Funds. Are ASIC brave enough to take them to task?