EXCLUSIVE ASIC’s review into life insurance advice commissions needs to be done in a way that is deemed acceptable by the industry, says FPA chief executive Dante De Gori.
During the Hayne royal commission, ASIC noted that it would not seek any changes to life insurance commissions until at least 2021.
But a recommendation from the Hayne final report that the cap on risk commissions should “ultimately be reduced to zero” has risk-focused advisers concerned about the future viability of advising clients on life insurance.
FPA consulting with ASIC ahead of review
Speaking exclusively to ifa, Mr De Gori said the FPA is working with ASIC in the lead up to the review into risk commissions.
“It’s quite early on, in terms of there is nothing really being set up for the review. But we are looking at research, we’re looking at the data,” he said.
“We’ve already engaged with ASIC and the regulator about how we can work together... and how we can assist in the review.”
Mr De Gori noted that during the time when the terms of the Life Insurance Framework was being discussed, people often forget that a zero-commission model was put on the table, something both the FPA and the AFA strongly advocated against.
“The FPA and the AFA actually did advocate quite strongly to ensure that there was a commission model in place. And I think people often forget that,” he said.
“Those that are criticising [the LIF] don’t understand the actual implications of what was on the table. And though we didn’t support a 60/20, we definitely support an 80/20 model.
“That’s why the FPA and the AFA have been working together now to ensure that this model is at least retained, if not improved, depending on the review outcome.
“That’s why it’s critical that the review outcome is done in a way that is acceptable by the industry, and the FPA and the AFA working together to ensure that that happens.”
Joint task force to boost adviser advocacy
In the meantime, Mr De Gori said the FPA is continuing to work with the AFA through its joint task force. He is also looking at finding new ways of supporting advisers through best practice around advised insurance.
“As an example, we are looking at potential guidance and education for financial planners. We are looking at how do we work with a regulator in terms of the process and the terms of reference around the review,” he said.
“We are working with the task force and looking at the data that’s being produced or made available from life insurance companies regarding what’s happening with policies.”
Mr De Gori said the best thing advisers can do until then is make sure that they give advice to their clients in the best way they can and ensure that they do the right things in the advice they give.
“Because we need to make sure that when the review is done and when they pick up a file to review, there was no question mark about the best interest duty and the advice that was given by the advisers in the insurance advice they give,” he said.
“They can control that. They control the quality of the advice they give. They can control the quality of service and the outcomes for their clients.
“That’s what they should continue to do and do well, and also support the work that’s been done by this task force to ensure that the review is done fair and equitably.”
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