FSC pushed for level commissions
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FSC pushed for level commissions

The Financial Services Council argued for a number of reforms to the life insurance industry that were ultimately recommended by the Trowbridge report, including on adviser remuneration.

The FSC’s submission – which has not as yet been made public despite a number of requests but a copy of which has been leaked to Risk Adviser – proposes a “remuneration model” remarkably similar to the “reform model” recommended by John Trowbridge.

Among a number of recommendations, the FSC argued that “high upfront commissions” should be banned and that the industry should move to a “level commission regime”.

Like the Trowbridge report, the FSC suggested that 20 per cent would be an appropriate level and that a level not exceeding current market rates should be implemented.

In addition, it proposes an “optional additional first year adviser service payment” which would be a capped percentage of the premium’s value to provide “partial, but not total, compensation to advisers for up-front costs”.

Similarly to Mr Trowbridge’s proposed Initial Advice Payment, the FSC argued this payment should be subject to a responsibility period and that “clawback of adviser payments” should apply.


The total first year remuneration for an adviser should be “significantly lower than existing rates for hybrid commissions”, the FSC argued.

“A level commission structure will result in a meaningful change across the advice industry that will assist in cultivating an environment conducive to behavioural change,” the submission said.

It also called for an insurer code of practice – to be agreed to by the FSC’s life insurance members – and proposed a 12-month period to determine the code’s content.

The recommendations come despite suggestions some FSC members were supportive of a hybrid commission regime, with a number of them having recently moved towards such structures. 

The Trowbridge Report can be accessed here: http://www.riskadviser.com.au/pdf/Trowbridge-report.pdf

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