Just a week out from its first meeting with new Assistant Treasurer, Kelly O’Dwyer, the Association of Financial Advisers (AFA) has confirmed that the key stumbling block and primary concern for advisers is the three-year claw-back.
What is more, AFA chief executive, Brad Fox, said advisers believe that the three-year claw-back shifts too much responsibility from the shoulders of insurers to those of advisers and does not support the Best Interests Duty responsibilities owed to clients.
Fox reflected that it had been 12 months since the release of ASIC Report 413 into Retail Life Insurance Advice and despite this, he believed the issues to be resolved by the Life Insurance Framework (LIF) needed greater focus and vision.
“On the 9 October 2014 ASIC released their highly targeted report into the quality of retail life insurance advice,” Fox said.
“Now, a full 12 months later, we have seen an FSI recommendation for level commissions only, the Trowbridge Report and the Life Insurance Framework released by the former Minister, Josh Frydenberg. We have also seen the issues widened beyond quality of advice to include regulator and government confidence in the integrity of life insurance advice. But will these measures actually resolve these issues?”
“In the last two weeks we have held further discussions on the life insurance reforms with many advisers including a group of risk-only advisers who have been active in meeting with Queensland Liberal MP, Bert van Manen, a former financial adviser,” Fox said.
“All of these discussions lead to the same conclusion — the primary concern of advisers is that the three-year claw-back pushes too much responsibility from the insurers to advisers and doesn’t support the Best Interests Duty responsibilities owed to the client.”
He said the AFA had discussed this issue with van Manen and would be sharing this thinking with the Assistant Treasurer.
“It is important that Government appreciates that shifting of responsibility from the institution to the adviser threatens the future of advisers that own or are employed in small business advice practices,” he said. “It also risks worsening the $1.6 billion annual cost to government caused by underinsurance if there are fewer advisers.”
Fox said the AFA would be asking the Assistant Treasurer to support some improvements in the LIF starting with claw-back, and to support the call for the industry to develop a vision for the future of life insurance for the good of the Australian community.
