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TAL head stands by LIF commission model

The Life Insurance Framework has been a good model for advisers since it began in 2018 and that changes beyond the scheduled 2021 review by ASIC should be “considered carefully”, says the chief executive of TAL.

TAL group chief executive and managing director Brett Clark said the current debate around life insurance commissions needs to be more sophisticated than whether commissions or fees is the better remuneration model.

According to Mr Clark, the debate needs to consider a number of different angles, including consumer access to affordable financial advice, the supply of financial advice, the payment for that financial advice that ensures consumers can be confident in its quality and minimising any potential conflicts or risks.

He said the development of the LIF was an attempt to balance these interests and ensure a sustainable, high-quality financial advice industry, which is good for consumers.

“The alternative of a user-pays full-fee model would undoubtedly lead to the supply and availability of financial advice being much smaller than it is today, and that financial advice would be affordable only for a much smaller population of wealthy consumers,” Mr Clark said.

“This doesn’t feel in the best interests of consumers, particularly in the context of banks exiting financial advice services.”

Further, Mr Clark said the commission-based model put forward by the LIF, alongside a legislated ‘best interest duty’ for advisers, is a good model for both financial advisers and consumers which balances these perspectives.

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He warned that alternative models which he says “limit consumer access to affordable financial advice, or the supply of financial advice” would need to be carefully examined, and that any further changes to the LIF beyond the scheduled 2021 ASIC review “should also be considered carefully”.

“Financial advisers are small business operators, providing local employment opportunities, often trusted members of the community, who work hard to provide competitive insurance products and services for their clients,” Mr Clark said.

“The parallels with the recent debate on mortgage broking remuneration are very relevant and insightful. We don’t want to depower competition while empowering large financial institutions at the expense of choice for consumer, and financial advisers play a critical role in that.”