A Coalition MP has confirmed his support for the current LIF commission model as the political stoush begins over ASIC’s upcoming review of risk advice.
Speaking at AIA’s Adviser Summit on Tuesday, Coalition MP and parliamentary joint committee on corporations and financial services member Bert van Manen said a commission model made sense for the risk sector going forward, and that payment methods had little to do with any inappropriate advice being given in the space.
“Commissions are a valid form of remuneration – there are a number of industries that have that model and insurance shouldn’t be exempt from that,” Mr van Manen said.
“The issue is that we need to stop focusing on the product side of the equation and focus on the advice side. For far too long the focus on regulation and discussion of the industry is the product – for me the important thing advisers provide to clients is the strategic advice, and if it’s not correct the product may not do its job.
“But we know there’s a resistance to people paying fees for advice for insurance, and we need to make sure there’s a remuneration model in place that advisers get paid for the important work they do.”
Mr van Manen’s comments came following an address from opposition financial services spokesman Stephen Jones, who said while he believed payments from product providers to advisers were “a problem”, he was happy to have his mind changed on the issue when it came to risk advice.
“It’s clear to me if you are getting a payment from the manufacturer, there is the potential for your interests to lie with the insurer and not the insured,” Mr Jones said.
“Conflicted remuneration is a problem. [But] there have been sectors in the industry that have made a case for an exception to that, and I’ve said to risk advisers around the country if they can make a case as to why the position I’ve got is wrong I will listen to it.”
The news comes as ASIC gears up to conduct its review of life insurance advice files, with the results due out in 2022.
The regulator has said it will review a random selection of advice files from 2021 and 2017 as part of its investigation, to compare the results and quality of advice before and after the introduction of the LIF.
Meanwhile, commissioner Kenneth Hayne’s final report from the financial services royal commission has recommended that “unless there is a clear justification for retaining [risk] commissions, the [commission] cap should ultimately be reduced to zero”.
However, Mr van Manen said where it was sensible to do so, the Coalition was open to amending its legislative response to the inquiry rather than adopting the recommendations in full.
“The results we had in the recent piece of [annual renewals] legislation about combining three documents into one is clear evidence that feedback from industry that I’m giving to the minister is being listened to and taken on board,” he said.
“We modified what we originally proposed as a government in terms of implementing the royal commission recommendations in full, we’ve amended that.”
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