If life/risk advisers were in any doubt about how they are perceived in Canberra then all of that doubt ought to have been removed when the Parliamentary Joint Committee inquiry into the Life Insurance Industry was tabled just before Easter.
The Parliamentary Joint Committee on Corporations and Financial Services inquiry into the Life Insurance Industry final report reflected the deep negativity with which our federal politicians view the financial advice industry and, it would seem, life advisers in particular.
The comments of the committee chairman referring to “a plethora of hidden payments including commissions, fees, performance-related payments, soft dollar benefits, and non-financial benefits” still existing within the various structures of the life insurance industry suggest that the Life Insurance Framework (LIF) may not have been enough.
“These money flows continue to exist to varying degrees across all three sectors: retail, direct, and group,” he said.
Indeed, the chairman’s comments put real meaning to the concerns expressed by ClearView managing director, Simon Swanson, in our last edition of Money Management that life/risk commissions may remain under threat.
Swanson referred to the removal of the remaining commissions allowed in the life/risk industry as being one of the “black swan” events which could emerge out of the Royal Commission. He was not to know that such suggestions might emerge from the Parliamentary Inquiry.
“I think the black swan event would be removing commissions,” he said. “The banning of commissions would be a real mountain to get over.”
Swanson was referring to the likelihood that highly negative testimony around mortgage broker commissions at the current Royal Commission into Misconduct in Banking, Superannuation and Financial Services might be the catalyst for a further assault on commissions, but parliamentarians of all stripes have made clear that their attitudes are already set.
What needs to be recognised about the Parliamentary Joint Committee report is that it was a bipartisan assessment. Unlike a number of other recent committee reports, such as that around the establishment of the Australian Financial Complaints Authority (AFCA), there were no dissenting views.
All of which suggests that, for better or worse, financial advisers working in the life/risk space have a vested interest in ensuring that the Life Insurance Framework works and that their political enemies are not given the opportunity to mount a new assault on the industry’s remuneration structures.
At the same time, the major industry representative organisations will need to be on their ‘A’ games to ensure that the Royal Commission does not inappropriately conflate the situation in the mortgage broking industry with that which prevails in financial planning and risk advice.
Financial planners remain convenient political whipping boys for politicians who have failed to grasp the significance of the Future of Financial Advice (FOFA) changes, the LIF and, indeed, the implementation of the Financial Adviser Standards and Ethics Authority (FASEA) regime, all of which means planners must remain on guard against the imposition of further radical change.
In short, planners should be prepared to fight for their rights but to do so in the knowledge they have few political allies.
