Financialadvisers will not need to disclose commission on risk products thanks to the lobbying efforts of the Association of Financial Advisers (AFA).
The AFA victory came after the Parliamentary Joint Committee on Corporations and Financial Services recommended against the move in its most recent report, deciding that cost and service were the primary influences on consumers of these products.
Under the Financial Services Reform Act (FSRA), disclosure of commissions is only required if it impacts on the amount of return generated by a financial product. The committee decided that the commission on risk products did not affect the end payout of the consumer, negating the need to disclose them to clients.
The Financial Planning Association (FPA) put forward the position to the committee that such a decision would mean that FSRA was not uniform across the industry, while the AFA argued that commission disclosure could not be argued on an industry-wide basis.
“The FPA has every right to argue for commission disclosure but they should be arguing it on an association rather than industry basis,” AFA research officer Dugald Mitchell says.
The AFA claims that the decision recognises the difference between disclosure of commissions on retail investment and risk products.
“AFA members supported the disclosure of commission where this affected the end benefit, but did not support disclosure where commission had no such effect,” outgoing AFA president Joe Nowak says.
Mitchell says other considerations are more important such as the clauses of the policy.
“The argument on disclosure started back when people were flogging products to get a trip overseas, and that is what the government has been trying to do something about.”
“There are always people that will take advantage of the situation but I think that largely those days are gone,” Mitchell says.
