LIAWG-appointed independent director John Trowbridge handed down his report this morning, in response to last year’s scathing review of life insurance advice by the corporate regulator.
Among a number of recommendations for “transformational change”, Mr Trowbridge has shone a spotlight on competition in the insurance advice market, advising licensees to rapidly adopt open architecture APLs.
The report recommends that licensees “ensure competitive access and choice for all advisers and their clients to available life insurance products by means of every licensee including on its Approved Product List (APL) at least half of the authorised retail life insurance providers”.
Since there are some licensees that “use as few as one insurer”, this would mean a significant opening up of product options for advisers subject to these currently-restrictive APLs.
The report also recommended that upfront commission payments be replaced by a level commission regime, with the availability of an “initial advice payment” in some circumstances.
This payment would become available at a client’s first policy inception and then “no more than once every five years” and only where the level commission is at a maximum of 20 per cent of premiums.
The report also requires licensees to examine whether they have sufficiently ‘client-centric’ cultures in place and calls for a code of conduct for insurers.
Click here to read the full report: www.riskadviser.com.au/pdf/Trowbridge-report.pdf
Why bother increasing the APL? with the lousy 20% commission we will get I won’t be able to spare any time comparing products anyway. I will stick to just the one product. Now that’s in the client’s best interest isn’t it?
I can already hear the chorus of those bagging these suggestions, those who rely on commissions and (at least some) churning to make ends meat.
I LOVE THE IDEAS!
Like it or not, will remove perceived or actual conflicts and DO NOT TELL ME that “consumers need insurance and won’t buy it” (if we have to charge fees since comm wont cover cost of providing advice) because consumers CAN afford it, it just takes a good adviser to enlighten them as to the value of having the cover in place and its importance over their other “essentials” like smokes, Foxtel, interest free Plasma TV repayments, etc…
These suggestions ARE a step towards professionalism (perceived and actual) and I hope the big licencees (and regulators) are paying attention.
The banks will invite the other banks onto their APL (they already do actually) so nothing changes here.
The big end of town looking after the big end of town … no change here at all.
When will the stupidity STOP!
As a Lisencee that may be forced to have more products on my APL due to regulations rather than what my research supports.
Does this mean if something goes wrong with a clients claim that is maintained in a product forced upon my APL that I can pass the buck back to this mob or the Government.
The APL recommendation is a joke
A minimum of 5 insurers. Lets see, 4 banks plus AMP each agree over lunch to include each other on their APLs. Nothing formal, because that would be a cartel !
That kills the others
The IAP rules are designed to have advisers put all products with one client with the one insurer – back to being a tied agent again
This is a Big Five stitch up- they are the only winners !
makes sense to me…
not sure what it is going to do on business valuations, does this promote vertical integration ?
Trowbridge was not appointedby the LIAWG he was appointed by the FSC
A direct quote from page 6 of the report… Setting the IAP at $1,200 is intended to make a contribution to cost recovery for advisers while falling short of full cost recovery, which is variously estimated at between about $1,500 and $3,500 per client. Is John Trowbridge trying to bankrupt financial planners? I have read the report. There is a misguided belief that stealing money from advisers will produce a cost reduction for clients. In reality, the savings will be pocketed by the life insurance companies. They will cry poor when the number of new policies being written is devastatingly and irrevocably reduced as a result of these changes. If you think this is an exaggeration, get out and talk to ordinary advisers rather than sitting in your ivory tower taking submissions from those who have no idea what it is like to work in the current regulatory environment.