Thechair of the Parliamentary Joint Committee on Corporations and Financial Services, Senator Grant Chapman, has indicated it may re-examine the issue of risk product disclosure in the next few months.
As reported inMoney Management,the committee recently released its recommendations in which it stated that the disclosure of commission on risk products within a product disclosure statement (PDS) was not necessary.
It also stated this type of disclosure should remain within the statement of advice (SOA) and financial services guide (FSG), confirming the situation as currently outlined within existing legislation.
However, Chapman says the committee examined a number of issues including the future of multi-agents under the Financial Services Reform Act (FSRA) and the taxation situation of risk advisers.
He says given the wide scope of the committee’s review he would recommend to the committee within the next week that a possible re-examination of the entire risk disclosure issue was necessary.
“The issues we would wish to consider is the total removal of risk disclosure in all documents and the original position as it stands has been reinforced by the most recent review,” Chapman says.
“We are not trying to force policy. The general view of the committee is most risk products are similar in that consumers receive a pay out regardless of commission and the issue is the price they pay for the policy.”
Chapman says even if the disclosure was removed across the board advisers would still need to disclose commissions if asked.
The issue of risk commission disclosure drew much interest from the industry’s two adviser associations, theFinancial Planning Association(FPA) and theAssociation of Financial Advisers(AFA).
The AFA stated while it supported disclosure of commission where it had an effect on the end benefit it saw no reason to support disclosure if there was no such effect. It also argued that consumers were not interested in having commission disclosed to them.
However, the FPA took a contrary view stating the committee’s approach was not uniform under the FSRA, and as a marketing tool, the PDS should contain disclosure on all financial products. The FPA also stated that where risk products were part of an investment package, the return on the investment product could be raised by loading the commission on the risk elements of the package.
