ASIC last week released Consultation Paper 284 (CP 284), Example Statement of Advice for life insurance: Update to RG 90, seeking feedback on the new example SOA and related updates to the guidance in Regulatory Guide 90 (RG 90), Example Statement of Advice: Scaled advice for a new client.
In a LinkedIn post, founder of Clique Paraplanning, Nick Topham, called ASIC’s example life insurance SOA “disgraceful”.
“[ASIC’s] attempt to create a clear and concise risk SOA has resulted in a document that is longer than almost all other licensee templates being used at the moment and is so packed full of dense text it borders on unreadable,” Mr Topham said.
“No innovation, poor layout and generally little to no thought put into displaying the recommendations in a readable way. But hey, commissions are on the front page so I guess that’s what matters.”
Advisers have also taken to the comments section on Risk Adviser and sister publication ifa, with some saying the example SOA requires 27 pages for basic insurance advice without including investments and superannuation.
“Anything more than five to six pages will not be read by the vast majority of our clients. To call the document ‘clear and concise’ is an insult to anyone who reads Consultation Paper 284,” one commenter said.
Another said they thought “sub-10 pages would have been a reasonable place to start”.
Others took issue with the requirement that commissions need to be disclosed on page one of the SOA.
One commenter said, “it certainly paints us as product sellers, not advice providers with the commission disclosure on the front in addition to the usual location”, while another said “the writing is on the wall that life companies and regulators want risk commissions gone”.
However, one disagreed that the example SOA is too long, saying risk advice is complex, especially with income protection contracts where definitions vary significantly across different contracts and providers.
“Throw in a comparison between an existing and newly recommended policy, and the additional layer of rules and advice if any of it is in super, and it’s pretty easy to get to 27 pages,” the commenter said.
I have no problem with the Commission upfront on the front page ….. provided direct TV ads and sales , Industry super funds , Corporate super all have the same regs with commissions in bold [b]before [/b] the sale is made . they won’t like the level playing field . Come on ASIC give us a level playing field. Also give a disclaimer in bold that the underwriting is done on claim (if applicable) and the inheritant dangers .
Nothing is going to make a client read an SoA if they don’t want to. Doesn’t matter if its six pages or 60 pages, so get over the fixation on length. Apart from very obvious politically motivated tripe and the usual double up, if a client chose to read the soa,It actually explains the advice very well. Its bordering on an advice tool rather than a compliance document. Just for the record, I am 100% risk and would be happy to present a document along those lines to a client.
The regulator may have staff that do not like risk insurance commissions, but I do not see the regulator wishing to shut down the real estate industry which charges enormous commissions.
Perhaps when they shut down for life insurance business, because no one is going to sell life insurance paid a salary by some bank, and the huge loss a cash flow and tax revenue the results, might then see the regulator going the same way as the Financial Services Authority in the United Kingdom.
There is no need for this apart from an SOA that is six pages.
With such a scary warning on the front page re commissions, its just another nail in the coffin for the life insurance industry. Degrees now needed, TASA registration now needed, insurers losing $500m last year, commission capped, rebates banned, banks selling their insurance businesses, AMP suffering with its life insurance business and growth stalled……..not sure more regulations and rules and restrictions is helping…….its all doom and gloom !