In an email to a Synchron-aligned adviser – obtained by ifa – Senator Sinodinos expressed concern that some industry associations have backed a proposal which will negatively impact the financial advice industry.
“Given your representations about the impact of the mooted measures, I was after an indication of how many people may be affected in practice, noting that the relevant industry associations have backed the proposed changes,” Senator Sinodinos wrote.
“I was then proposing to pass on the information to relevant people in government.”
In an email to Senator Sinodinos, the adviser said the proposed LIF measures would be “unsustainable for advisers” and that more than 50 per cent of full-time life insurance could exit the industry if the changes go through.
The adviser asked his fellow advisers to contact the senator since Senator Sinodinos needed “critical mass” for the fight.
The adviser also planned to meet with Speaker Bronwyn Bishop to further the cause.
ifa also understands that two independent senators are concerned about how the proposed LIF may negatively impact advisers.
The Association of Independently Owned Financial Planners (AIOFP) has been vocal about the risk proposals and last week released its own life insurance commission submission which demanded changes to the clawback policy.
AIOFP executive director Peter Johnston said the FPA, AFA and the FSC have engaged in a ‘good cop / bad cop’ routine, selling out advisers in the process.
“The risk submission put forward by the institutionally-aligned associations to the minister has all the hallmarks of the political strategy used against the financial advisers with FOFA over the platform rebates,” he said.
At the same time, AFA has clarified its positions on the clawback policy, which has raised the ire of many risk advisers.
AFA chief executive Brad Fox said the three-year retention period is a “blunt instrument” but has strong government support as a measure to deal with inappropriate product replacement.
“Over the coming weeks we will continue to apply pressure for clawback to apply only with replacement product advice and not situations that sit outside the advisers’ control, like a client-directed lapse because of unaffordability,” Mr Fox said.
“Shifting the burden of responsibility to the adviser where policies lapse outside of their control is unfair,” Mr Fox said.
Mr Fox also added that the AFA is seeking confirmation from insurers that they won’t apply clawback where the policy lapses due to a successful claim, for example of a life, TPD or trauma policy.
Mr Johnston said these moves by the AFA are too little, too late.
“We now have one of the institutionally aligned associations who participated in the engineering of the proposal to the minister now ‘shares the concerns’ over the details with advisers, ‘particularly around the three year responsibility period for new business,” he said.
“Perhaps they should have thought about this before they put their recommendations to the minister? Perhaps they should have sought adviser opinion before submitting the proposal?”
The AIOFP is now demanding the three associations that helped construct the proposal release it to the public.
“If the advisers’ views and concerns were seriously taken into account, why was it not done from the outset? We can only assume that the proposal was heavily weighted in the institutions’ favour and the advisers were disadvantaged,” he said.
“We think the AFA members should be demanding that the AFA Executive come clean with the full original details of what they recommended.”
Very interesting proposal, to challenge the issue of “Churning”.
Three year in place and no commission write back to the adviser is a much better place for the client.
Acting in the best interests of the client, at all times should be in the fore front of the adviser.
Products structured with large up front commission such as Suncorp Life 115% of first years premium are being used to get new business on the books.
Kind regards,
Adrian Totolos.
Business Analyst.
[quote name=”Elaine”]Thank goodness for Sinodinos, Synchron and the AIOFP for continuing to push for sanity on our commercial interests and in the public’s best interests, where other groups have either rolled over and played dead or else given up after a half hearted fight.
If there is anything we should be doing as an industry, it seems to be these same groups looking after our interests, instead of lame half baked nonsense like that whole ‘enshrinement’ fiasco during the opt in/FDS period.[/quote]
Well said Elaine!
Thank goodness for Sinodinos, Synchron and the AIOFP for continuing to push for sanity on our commercial interests and in the public’s best interests, where other groups have either rolled over and played dead or else given up after a half hearted fight.
If there is anything we should be doing as an industry, it seems to be these same groups looking after our interests, instead of lame half baked nonsense like that whole ‘enshrinement’ fiasco during the opt in/FDS period.
No 23 – Modern Adviser
I completely agree! Watch the Insurance companies close this down before he can get colleagues on board.
I read the report you linked from Brad Fox and I think it is a very good report. It includes MANY of the points that are central to the argument against the reforms. Comes from an advisers point of view. A real quality report. It changed my mind about him a little bit. How his position changed so drastically I can’t understand.
He should of left it at that and waited for Frydenberg to try and quietly do FSCs bidding then attack it publicly in the media. Fought hard like an industry union or mining company.
I’m starting to feel sorry for Brad (I don’t work for the AFA) It seems the banks have such a huge influence they were always going to get what they want by bullying the associations through scare tactics.
I think he got manipulated by the FSC and his concessions were then used as the starting point of negotiations not the end point.
The ONLY way we ever had a chance was a media campaign.
Headline saying
FRYDENBERG LET BIG END OF TOWN HIJACK INSURANCE REFORMS TO PROFITEER AT EXPENSE OF SMALL BUSINESS. CALLS FOR ROYAL COMMISSION GROW.
The only people who hate banks more than us are the general public. POLL numbers are the only thing the govt really listens to above and beyond their banking pay masters.
Perception is everything. Our livelihoods are at stake here! I would donate money for a marketing campaign.
Would anyone else contribute to such a campaign?
To Genuine
Its a pity to argue amongst ourselves but your comments to deserve a reply
Privacy is about protecting personal information. There is no personal info involved here. And the AFA submission to the Frydenberg discussions( not the Trowbridge submission ) is not commercial in-confidence – the AFA is an open organization. And I reject your analogy re disclosure of private information
Lets cut to the chase here. The AFA is answerable ONLY to its adviser members. If not, who are they responsible to. The AFA is there to do the adviser members bidding. To do that, they must ask RISK ADVISERS what we want, and that has not happened to the degree it should. Instead we are TOLD what the AFA wants to do
Even the FPA, with few genuine risk-only advisers as members, claims it consulted members
I am not expecting a member plebiscite on everything but remuneration and the clawback is the most important thing the AFA can do since 1948
[/quote]
[quote name=”Adam P”]Oh now the AFA are going to separate the reasons for a clawback. What a complete load of BS.
The FSC and cronies the FPA and AFA have continued to say for years they don’t have the data to separate these situations and cant truly get the figures on churn v real lapses / claims.
But now all of a sudden they can get these figures.
OK FSC, AFA, FPA if you have the real figures on Churn then produce them !!!!!Everybody knows who the churners are within the industry but it actually makes the institutions managerial bonuses continue to be paid with the extra business.
The FSC, AFA and the FPA who don’t release their submissions are obviously only looking after their own institutions.
What a farce these institutions and associations can be!!
Great job AIOFP for continuing to try to expose this rubbish from FSC, AFA and FPA.[/quote]
The AFA Submission was released publicly 21 April 2015. Existing hybrids and a one year clawback were central to it.[/quote]
Hey Brad Fox, is the joint submission from the AFA / FSC public ???
No one but you, FSC and Frydenberg seems to have this, if not why not ??
What are you hiding from your AFA Adviser Members ??
If its public please post the link here for all to see.
[quote name=”Modern Adviser”]This is disgusting. Who in their right mind would have a confidential conversation / email with a Senator and release the details. Unbelievable! This will do more harm than good.
Regarding the AIOFP I agree with their position and encourage their involvement but seriously think about working with the bodies and not polarising them. A unified response to Frydenberg will undoubtedly be more effective.
AFA’s position has been public for a long time. https://www.afa.asn.au/sites/d…[/quote]
Thanks for that link Modern Adviser – But I don’t believe that is the Final Submission that the AFA jointly put together with the FSC. Has anyone got a copy of that one ?? That’s the important one !!!!
[quote name=”Old Risky”]To Modern Adviser
The link you provided shows the AFAs submission to Trowbridge
What I want to see is the papers put to Frydenberg by the AFA. And I still want to see it , even if its the JOINT AFA/FPA submission
Advisers want to know – NOW !!!![/quote]
You don’t seem to understand the nature of privacy. AFA have provided/publicised their official stance and submission.
Requesting to see more private discussions/communications is not going to happen.
Would you disclose all your client communications to some stranger who asked for it over a comments section of a news site?
The AFA put forth their stance, and fought for that. Sure, they were not successful, but at least they joined the fight genuinely, and it could have been worse.
Other representative organisations did not take part in any meaningful, and [i]NOW[/i] are making a lot of noise and announcing that [i]they[/i] care about advisers… well after the fact.
To Modern Adviser
The link you provided shows the AFAs submission to Trowbridge
What I want to see is the papers put to Frydenberg by the AFA. And I still want to see it , even if its the JOINT AFA/FPA submission
Advisers want to know – NOW !!!!
[quote name=”Dave”]the main issue to address is where a new adviser changes the policy-churns- because it is an easy dollar. Lets be frank, if a policy is under 3 years old, why change it. This aspect being controlled will remove most of the fears associated with claw back. Insurers need to find a control mechanism for this issue. Other reasons for policies ceasing are not that big but a better outcome should be sought where the adviser is not at fault. Churners are still out there and see it as their right to make a dollar, stop them and the industry will be better for it.[/quote]
Seriously? I have four renewals (ALL under 3 years) due this month from one company. Increases are 2 @ 15%, one @ 19% and one at 25%. Tell me, how is the client better off paying these massive increase when policies are all so similar? When the companies gouge OUR customers, our job is to ensure they are looked after.
“Lets be honest here” the insurers are the REAL problem here.
This is disgusting. Who in their right mind would have a confidential conversation / email with a Senator and release the details. Unbelievable! This will do more harm than good.
Regarding the AIOFP I agree with their position and encourage their involvement but seriously think about working with the bodies and not polarising them. A unified response to Frydenberg will undoubtedly be more effective.
AFA’s position has been public for a long time. https://www.afa.asn.au/sites/d…
The 3 years claw back needs to be taken of the table and the industry needs to take a big breath,I have swam about this industry for 35 years in Life insurance,this 3 year claw back in a terminal situation for the industry.Advisers will leave by the truck load,new advisers will not join.I know that 60/20 commission will damage the industry on its own,however the 3 year claw back is a terminal blow.
I wrote a level premium contract for a client in May last year. The policy was owned by the clients SMSF. In October the client decided to wind up his SMSF and asked me to arrange a change of ownership on his policy
I contacted the insurer (good old Asteron) and asked them what I had to do and also asked would anything including commissions/ premiums be affected. Answer NO> Well Guess what when i did a cancel and replace and when wrote the policy there was 32% level commissions and when i did a cancel and replace the new rate was 27.5%.
Not only did Asteron send the wrong forms out ,causing me to waste many hours of both the clients and my time they lied to me and it cost me nearly $800 a year for the life of that policy.
I agree I would Like Mr Fox and the AFA to release these details to members. I for one will be asking this at the AFA Roadshow of Mr Fox.
[quote name=”Dave”]13 BKY
You are totally correct and no argument. I was ONLY looking at the clawback time issue. I see too many times where a good policy on LEVEL premium is re written—WHY—-$$$$$- not in client interest-only the adviser (churner) at the expense of a good adviser.[/quote]
Gottcha…totally agree with you. Cheers
I promised this position to a couple of my underwriters.
A cleint buys a post 2016 policy and 10 mths later transfers to a ne adviser, then in the 2nd year the client lapsed so a reverasl happens. Now my under standing is that they will seek 80% of the total amount paid so for the example, the 1st adviser got $1000 and I got $200 (2nd year) but they recovered $960 from the Servicing Adviser who only made $200, this makes for interesting accounting and even more interesting debt recovery. None of the providers have been able to confirm or deny that this would be the case, anyone know the answer – I hope that all makes sense
From what I have read and listened to there seems to be a lot of expediency in what has been proposed and not much reform.
As it stands it wont be just the adviser that could be left with the burden of lapses within a three-year period. This three-year responsibility period will also affect advice firms and dealerships particularly when an adviser who has originally been paid for the business. Leaves, goes elsewhere and or exits the industry altogether and the business that adviser has written starts to lapse or mysteriously starts to yet again get churned.
In this situation either the advice firm the adviser was working for or the dealership he was licensed under would be left with a debt from this business and the issue of trying to recover the money from the adviser who is no longer in their control.
So is going to be a burden on the adviser, the advice firm the adviser worked for, and more than likely the dealership who the adviser was licensed under.and the life office has been left with not a care in the world.
Yep, definitely we are heading towards reform.NOT
Churners will still survive on 60% and re-write after 3 years! We all need to write to any politician who will listen.
13 BKY
You are totally correct and no argument. I was ONLY looking at the clawback time issue. I see too many times where a good policy on LEVEL premium is re written—WHY—-$$$$$- not in client interest-only the adviser (churner) at the expense of a good adviser.
Hi All
The best way to deal with this is to email and voice your concerns and opinions directly to your local MP and all senators. This way we don’t have to rely on the AFA or any other body who claims to represent the Adviser. These MPs and Senators need to understand what we do (Life Risk…not investment services for the already wealthy) before they can legislate meaningful and appropriate change. Last point…Risk should be separated from Investment so everybody is clear about what it being proposed whenever someone comments on Financial Planning or relates to Financial Services.
[quote name=”Dave”]the main issue to address is where a new adviser changes the policy-churns- because it is an easy dollar. Lets be frank, if a policy is under 3 years old, why change it. This aspect being controlled will remove most of the fears associated with claw back. Insurers need to find a control mechanism for this issue. Other reasons for policies ceasing are not that big but a better outcome should be sought where the adviser is not at fault. Churners are still out there and see it as their right to make a dollar, stop them and the industry will be better for it.[/quote]
Dave…for the most part I agree with you. I’d just like to understand your comments about the 3 year period. In my opinion why would you move any policy after 3 years and risk resetting the 3 year non-disclosure period? Any experienced claims manager will tell you that a policy more than 3-years old stands a better chance of being paid without too much, if any, investigative scrutiny…meaning money becomes available quickly for the client.
Well done Peter, would appropriate all submissions be made public. To see exactly who each association was really representing. Because it doesn’t appear anyone was there representing the best interests of advisers or clients.
Risk Adviser I am guessing you are unaware of the very public discussion that was happening 6 months ago. The AIOFP, and many others, pointed out that if the issue was genuinely about churning and an alleged increase in the premiums charged to the consumer as a consequence that there was no need for government intervention or any material change in regulations. The insurers simply had to cease offering large up fronts to suspected churners and place them on level commission. The submission was that there was no need for change in regulations at all. Instead the stewards of underwriting should act responsibly. However these stewards simply don’t trust each other enough to act responsibly and wanted an imposed regulation. It was a small jump from there to where they could then also trim commission expenses and increase their own bonuses. Its not like they intend being around 5 years on to explain the drop off in business.
Peter Johnston grandstanding once again. My understanding is the AFA attempted to do all that Johnston is asking for but was rebuffed by the FSC and Frydenberg. From his comments Frydenberg, like most politicians and corporate regulator hacks, has never worked inside a planning practice and has little if no understanding of the industry he is regulating.
If only Sinodinos didn’t have his stint in the chair at ICAC, this would probably have wound up very differently. Frydenberg has sold the industry out.
the main issue to address is where a new adviser changes the policy-churns- because it is an easy dollar. Lets be frank, if a policy is under 3 years old, why change it. This aspect being controlled will remove most of the fears associated with claw back. Insurers need to find a control mechanism for this issue. Other reasons for policies ceasing are not that big but a better outcome should be sought where the adviser is not at fault. Churners are still out there and see it as their right to make a dollar, stop them and the industry will be better for it.
Oh now the AFA are going to separate the reasons for a clawback. What a complete load of BS.
The FSC and cronies the FPA and AFA have continued to say for years they don’t have the data to separate these situations and cant truly get the figures on churn v real lapses / claims.
But now all of a sudden they can get these figures.
OK FSC, AFA, FPA if you have the real figures on Churn then produce them !!!!!Everybody knows who the churners are within the industry but it actually makes the institutions managerial bonuses continue to be paid with the extra business.
The FSC, AFA and the FPA who don’t release their submissions are obviously only looking after their own institutions.
What a farce these institutions and associations can be!!
Great job AIOFP for continuing to try to expose this rubbish from FSC, AFA and FPA.
Well done to the Synchron group and well done Peter Johnson. Finally, somebody with a bit of nouse and intestinal fortitude is speaking out.
I can’t say I’ll be rushing to renew my AFA membership any time soon.
Some one should explain to the Senator how Associations fit into the food chain…FSC look after themselves and the comapnies…self interest……FPA supported by Companies…..Self Interest…..AFA support Advisers BUT have been hoodwinked into going along because the alternative was going to be Dire. The 3 year clawback will hurt our INDUSTRY BIG Time over the next 10years…watch and see….Adviser practices will close…recruitment will stop…underinsurance will blow out further.
Looks more and more like a stitch up the further it goes.
Nice of Mr. Johnston & the AIOFP to weigh into the debate AFTER the proposals had been released. It’s much easier to put forward a submission when all the other parties had put their cards on the table. If I was a cynic I would think Mr Johnston is being opportunistic……… Much easier to do with the benefit of hindsight!