Among the 76 recommendations handed down by the Banking Royal Commission was a recommendation to ultimately reduce the cap on life insurance commissions to zero, unless there is “a clear justification for retaining those commissions.”
The government has indicated it has supported all of the recommendations, including this one.
The United Financial Advisers Association (UFAA) has formed from the original Life Insurance Customers Group (LICG) this year, and is now looking to represent advisers who are dissatisfied with the efforts of the AFA and FPA. The UFAA will lobby for a sustainable commission environment and highlight other unintended industry-damaging factors that will ultimately see consumers worse off. The UFAA believes there is a ‘clear justification for commission’ and this case needs to be put forward.
Mark Schroeder, former Spectrum Wealth chief executive has dedicated himself to the effort, along with Alex Vagliviello, principal of Charles Alexander Financial Services and Interim Chair of the UFAA. Since its launch this year the UFAA has grown to over 3000 members.
The pair criticised the FPA and AFA for not acting in the best interests of advisers, while receiving funding from the major institutions and competing with IFAs: “The FPA has a war chest in the order of $10 million, which we assume has been saved for a rainy day. Well it is pouring now,” the pair said.
Their fear is that advisers cannot operate their businesses on 60 per cent commissions, a drastic reduction from past figures, let alone no commissions at all.
“There needs to be a balance in adviser remuneration, otherwise many businesses will eventually become unviable, which will lead to fewer advisers available for consumers and higher consumer costs.”
Mr Schroeder said a very clear example of what successful lobbying can achieve was the recent success of the mortgage industry.
“The mortgage associations lobbied effectively to demonstrate the value of balanced remuneration commissions. In a matter of a few short months after the Royal Commission findings, the Government agreed to reinstate their commission income from zero to sustainable levels,” he said.
“The AFA and FPA have set themselves up firstly, as industry associations that should lobby for the right thing for members, but have achieved little.
They’ve now set themselves up as training organisations because on top of everything else, even experienced Advisers have to have a degree. And so we’re going to pay the associations a further perhaps $6,000 for FASEA on top of their fees for training, further inflating their coffers, and doing nothing to stem the decline.
They’ve also decided they’re now going be a code of conduct police force. So rather than trying to support advisers survive the raft of challenges we are facing, they instead want to be the ones to shoot down advisers. Its ASIC’s job to regulate. We’ve already got that, we need more support, you know what I mean?”
Mr Schroeder said the associations were recently criticised heavily about not lobbying the government as they’re supposed to. Instead, he says they came out with a ‘pack’ and said ‘if you want to lobby the government, here’s a pack, you go do it on your own.’
“Well, what are we paying membership fees for and what is stopping the association using its reserves to fight for its members?”
Mr Vagliviello said the UFAA exists to lobby for IFAs.
“We are placing ourselves at the forefront and will attempt to complete the task that the AFA and the FPA were not able to achieve due to their perceived conflict of interest with major players such as bank and life companies and the bigger bank owned distribution networks,” he explained.
A major concern is the number of advisers leaving the Industry due to legislative and regulatory changes. The biggest challenges are stemming from the removal of grandfathered commissions and the ongoing discussions to reduce the cap on life insurance commissions, as well as the two-year clawback period and ongoing advanced education requirements. There are around 23,000 advisers in Australia, with around 4,000 leaving the industry in the last six months – namely, Vagliviello says, because they cannot afford to be in business.
“Because you cannot operate on a 60 per cent commission rate, you can’t do it. People say ‘Oh well you know what, we’ll get rid of commissions and we’ll make sure that you can charge a fee of two to three thousand dollars or more per client, and you know what clients are going to say to these on costs? – “see you later.”
Mr Schroeder said Australians are at real risk of being underinsured.
The case for life commissions has been made before, with other advisers such as Eugene Ardino of Lifespan Financial Planning pointing to Australians already being “chronically underinsured,” with a potential danger of them gravitating to inferior or inappropriate online insurance products.
Currently, the UFAA is focused on attracting members and funding, with the intention of facilitating strategies to bring before Government a balanced argument on behalf of all Advisers in response to the outcomes of the recent Royal Commission into Banking.
With 3,000 members and growing, the UFAA is planning to head to Canberra when it reaches around 4,000 to 5,000 members.
The UFAA was founded to become an advocate group representing advisers who have become disenchanted with the lack of perceived action from both the AFA and FPA in response to legislative and regulatory changes that have been imposed over the past few years. Advisers are seeking a united voice to have their concerns heard.
“The Government is already aware that the banks and institutions are mostly divesting themselves of their financial planning arms, [and should be asking] who’s going to do the financial planning,” Mr Schroeder said. If the IFA planners cannot sustain a business, where are consumers going to get vital financial planning advice?
The government listens to the Financial Services Council (FSC) and they also listen to people who pay their election campaigns. The banks are rusted on to a model of: if you can’t give them financial planning, just get them to come in and buy something else off the shelf. Consumers deserve better than this.
“So there’s still big hurdle to get over. But there’s more people listening, and a lot more advisers prepared to actually stand up and say something.
“You know, without trying we attained almost the same amount of members as the AFA, we are volunteers whereas the associations pay themselves in the order six million dollars in wages a year each.
The FPA is controlled by the COO – that’s the problem
I could not agree more with the AFA and FPA especially letting advisers down over the LIF. They sided with the FSC because they are sponsored by their members. They did not stand up to ASIC over its flawed 413 report and the outcome was ASIC admitting that they got it wrong. The results have been a disaster for both customers and advisers.
You only have to look at the mortgage broker bodies to realise how weak and financially conflicted the FPA and AFA are.
Neither the FPA or AFA deserve us to be paying for membership and any adviser worth their salt should cancel them.
You might as well support the UFAA because they just cannot be any worse than the clowns who are the FPA and AFA
The AIOFP has long held the real fight for adviser rights and called out the FPA & AFA as Institutional supporting bodies.
We don’t need another IFA group.
Join the AIOFP and make its voice stronger against the FPA & AFA.
JJ. What is an “Aswell” ?
Could the remaining FPA members please turn off their Blackberrys, untie your horses from the car park, pay your Blacksmiths for the shoes and ride on out of town pilgrims.
If you are ‘still’ an FPA member you need to take a good long look at yourself. Everyone els is laughing at you, including the FPA!
Yep, didn’t pay my FPA membership, decided to let the CFP go and they sent me a very threatening letter for not paying, I couldn’t get over the arrogance… RIP FPA is all I can say!!
Also, the industry never ever collectively collaborated to make it a better place for advisers and for the public, my opinion on this is because the banks owned the majority of the market share and didn’t really care what happened out side of head office. Sorry to say that the best days of the industry are long gone, and they will never return, well not in my working lifetime anyway. The good old days will be spoken about, however the next generation of advisers will only hear about those days and not experience it themselves.
I remember when I did not renew my FPA membership some years ago, I got an intimidating email to renew. I replied to the email and the FPA never seemed to have followed me up again. I wonder why?
How the CEO of FPA still has a job is incredible, gotta give to him, he sure is a survivor if he can maintain his job after his diabolical performance and utter contempt for his membership. Clearly there is a structural issue inside the FPA, as if it were functioning properly, he would have been made accountable and removed, this is a clear symptom of something wrong in the under belly of this organisation and it’s governance structures. When accountability vanishes, then an organisation inevitsbly will start to fall apart. The members are responsible here too, there should have been a revolt and typically advisors have remained passive. It is the imperative of individuals to vote with their feet, the power of walking off with fees should not be underestimated, it would be great if somehow advisers could organise and boycott. We should leave the FPA, redeem all AMP products, write to your dealer group and request they are removed from APLs, redeem managers who invest in AMP stock and totally boycott education institutions who have conflcited members both employed by unis and who are sitting on the FASEA board. All those clipping our tickets and ruining our futures shOuld have their livelihoods targeted in the same fashion. Let’s hold them accountable through the only thing they know how to respond to and that is $$$$$. How could anyone accept the indignation of having the FPA monitor them as a code monitoring body? Have some self respect and take the first step in cancelling your FPA membership, don’t forget to tell them why.
I agree that ALL advisers need to stand up for eachother. Too many are suffering stress. I urge everyone to contribute to the ARC high court challenge. It is the only way to stem this abuse of advisers in general.
I contributed $1,000 from my practice to support our brothers and sisters in this fight. here is the link
https://arcfund.com.au/
“without trying we got almost the same amount of members as the AFA”… Well have any of these members actually paid a membership fee? are they legit members willing to part with their cash?. If you go to the UFAA website any person could just type in any old name to become a member for free. To consider the credibility of this organisation you need to consider the credibility of the people running it. Whats their end in all of this.
Those who believe the CFP designation is worthwhile are compelled to remain with FPA. Anyone else who is is still a member needs their head read.
[quote=Anonymous][quote=JJ]AFTER 18 YEARS OF A FULLY PAID MEMBER I DID NOT RENEW MY FPA
Bravo. Well done. Every adviser still paying these clowns needs to cancel their memberships at least.
These FPA Nazi’s need to be taught a lesson in loyalty, morals and consequences for bad behavior.
[/quote]
i have been calling on this for months, and years. am finally getting traction, though it’s 1 or 2 occasionally. advisers are loyal like a dog. they never want to leave their master.
but boys, we are getting stitched up and enough is enough.
i say boys, because ladies are way smarter and would never be a fpa member in the first place or have left already
These guys havent done anything in years! Send out a communication about some dodgy conference and that was it. This isnt the group to go forward with
Seems like there are bits missing from the transcript in the Article. I am tired of the AFA and FPA just rolling over on so-called reforms that they know will put clients in a worse position, will destroy the IFA planners businesses and favour the banks and institutions. Our businesses may not be viable in the near future, Finally someone is doing something about this. I will sign up to the UFAA to give them the numbers they need to get things done!
[quote=JJ]AFTER 18 YEARS OF A FULLY PAID MEMBER I DID NOT RENEW MY FPA MEMBERSHIP AND SUBSEQUENTLY LET MY CFP GO ASWELL. I QUIZZED THE FPA WHAT THEY DO FOR ME AS I HAD NEVER HAD ANY CONTACT WITH THEM, I WAS ADVISED THEY DON’T CATER FOR ALL ADVISERS OF WHICH I WAS APPARENTLY ONE OF !!! MY REACTION WAS WOW ! [/quote][quote=JJ]AFTER 18 YEARS OF A FULLY PAID MEMBER I DID NOT RENEW MY FPA MEMBERSHIP AND SUBSEQUENTLY LET MY CFP GO ASWELL. I QUIZZED THE FPA WHAT THEY DO FOR ME AS I HAD NEVER HAD ANY CONTACT WITH THEM, I WAS ADVISED THEY DON’T CATER FOR ALL ADVISERS OF WHICH I WAS APPARENTLY ONE OF !!! MY REACTION WAS WOW ! [/quote]
Bravo. Well done. Every adviser still paying these clowns needs to cancel their memberships at least.
These FPA Nazi’s need to be taught a lesson in loyalty, morals and consequences for bad behaviour.
I have no idea why anyone still supports the FPA and to a lesser degree the AFA.
Is it Stockholm syndrome? Is it fomo? Maybe it’s just they have already passed the Adfp/CFP accreditation via the weeties packet accreditation’s the FPA would virtually give away as long as you paid the fees and they don’t want to rock the boat.
This industry and every adviser in it was set up, their businesses hijacked and royally shafted all thanks to thenFPA’s greed and dishonesty.
They knew exactly what they were doing and used a speed camera type justification to be d all of you over for a jolly good Rogering.
Go away FPA, I wait for the day you fall on your sword. With the amount of advisers leaving this industry for it is too expensive time and money wise to stay in it, that day should be soon.
To all you fools still paying your FPA memberships, WAKE UP. Your supporting the fox in the hen house and they need to be shot for their actions. Hurry up and grow a pair and send the FPA a stern message that their actions were abhorrent and immoral.
Sack them now.
If you are thinking of representing people and our industry then do so with better English. We saw the mortgage broking community get their act together and as a group lobbying the injustice of their industry being decimated in a matter of weeks and taking to the airwaves. Yet, here we are once again being asked to join another industry body to serve our industry advisers.
Here’s a thought; instead of paying these fees to the associations why don’t we contribute $500 per adviser, assume there is about 20,000 of us left in the industry this equates to $10 million, use these funds to ask our clients to promote the positive outcomes of adviser/client relationship and demonstrating the values of good advice. In particular, on how their lives have change for the better (in a national campaign) that also highlights the many suicides that have occurred in our industry as result of these testing times, which ironically barely gets a mention in the media.
AFTER 18 YEARS OF A FULLY PAID MEMBER I DID NOT RENEW MY FPA MEMBERSHIP AND SUBSEQUENTLY LET MY CFP GO ASWELL. I QUIZZED THE FPA WHAT THEY DO FOR ME AS I HAD NEVER HAD ANY CONTACT WITH THEM, I WAS ADVISED THEY DON’T CATER FOR ALL ADVISERS OF WHICH I WAS APPARENTLY ONE OF !!! MY REACTION WAS WOW !
Hmmm. The FPA, largely funded by members but without a member charter – hence no obligation to members.
We deserve better.
And if the FPA believe that they are equipped as the principal Code Monitoring body, some of their own CBus conflicts and treatment of members will surely become evident.
Whether you believe in commissions or not, the points raised by this new body highlight the complete and utter failure by the FPA in representing the needs of Australians and Advisers. The CEO of the FPA needs to step down ASAP. Given the behaviour exposed in the Royal Commission it’s shameful to be called a member. Now if you disagree with anything that the FPA does you’ll be thrown under the bus by their new code monitoring body. Over laid in all that is the continued payments they receive from licensees directly owned by product manufacturers such as the big banks. The FPA made a choice between calling out the actions of CBA or acting in the best interest of members and they chose the pay cheque offered by CBA and that resulted in over regulation, FASEA exams, a Royal Commission. In that backdrop the CEO still is being paid north of $300K and on board.
“But the thing though, is that the banks who are still driving the industry that still because the government service commission, they also listen to people who pay their election campaigns. And the banks are sort of rusted on to this model of is that, you know, if you can’t give them financial planning, just get them to come in and buy something off the shelf.”
I’m not even sure I understand this sentence??? I am not a fan of the FPA or AFA, and I really like the idea of an association who will actually represent us to Canberra. But can we be a little more articulate please?
Total agree and it is long overdue to have a group that will represent advisers and not the big insurers. When Trowbridge came about, all we were told was don’t worry it is only a draft report, it won’t go through and it did.Who won? Not us! the same with FOFA and ‘best interest’ etc. My own view is that the final compromise will be than insurance commissions remain, but at 20% like general insurers – unless we do something about it. Onya UFAA! How do we sign up?
I’m still waiting to see either the AFA or FPA condemn the actions of AMPFP against their aligned network…
Brutal but true. The AFA/FPA has totally let down advisers in the industry. What a mess.