Convenient political whipping boys

The recent release of the Parliamentary Joint Committee on Corporations and Financial Services inquiry report into the Life Insurance industry makes clear that planners have few political friends and plenty of enemies.

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.

Related News:

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.

 




Recommended for you

Author

Comments

Comments

It is ridiculous to believe anything else other than the vested interests who have had an unhealthy obsession and a manipulated agenda over the last decade in respect to Life Insurance advice.
It is beyond reasonable comprehension that any individual, Govt, industry or regulatory body could relentlessly commit so much capital to a cause of pursuing the agenda to rid the Life Insurance space of any commission remuneration basis whatsoever. The interesting observation over such a long time is the completely false reasons put forward for their obsession, such as increasing the quality of advice received by the consumer. This is wrong.
The removal of or reduction in the level of commission received does not control the quality of the advice received.
This belief that the removal of commission somehow enhances the quality of advice is wrong but is the most convenient
and simplistic argument to put forward in order to at least falsly appear to be politically fighting for consumer justice.
The ASIC Report 413 was entirely constructed and manipulated to produce a desired result and to serve as a catalyst to attack the Life Insurance industry because some elements were seething with rage that it was originally left out of the FOFA legislation. If you were to design a study to try and identify black sheep from white sheep, but made sure that the vast majority of the sheep in the sample group were in fact black sheep, it's simple to calculate what the results were going to be.
The fact that the Govt, Kelly O'Dwyer and the media continually refer back to the Storm Financial issue as a reason why commissions must be eliminated for Life Insurance is even more ridiculous.
It needs to be remembered that the Financial Services Council in their submission to John Trowbridge on 5th Feb, 2015 clearly supported the Level commission only model, but in later commentary identified their expectations and wishes for no commission at all, again completely justified by claiming a resulting improvement in quality of advice to the consumer.
Anyone with any radar at all knows full well the FSC were and are entirely focused on shareholder driven profitability from their membership companies and are dictated to by their membership dollars received by which they fund their operations.They are beholden to their masters and so pursue the agenda required to satisfy them.
With the PJC recently suggesting a "random" surveillance of at least 20% of Life Insurance advisers over the next 3 years, it is obvious what the intention is. The intention is to gather as much manipulated and conflicted data as possible by which to put a recommendation forward that LIF has failed and that commission must be removed from Life Insurance products.
As a Liberal Govt that supposedly supports small business as the backbone of the country's economy , they are doing a job like no other on the Life Insurance advisers who deliver high quality, meaningful and important financial security strategies and advice to millions of Australian's every day of the week.
The Liberal Govt in it's continued pursuit is slowly and deliberately destroying these businesses and the Life Insurance companies sit in silence, without criticism of LIF, without criticism of the false agenda.
They are happy to accept new business inflows and happy to know quality advisers are working hard to maintain existing business, but they have treated quality advisers with utter disdain and disrespect and appear more than happy watching from the sidelines.

Agree with everything you've said Agent 86. The big problem for us is that the so called "random" surveillance won't be random at all, they'll target bank Advisers and we'll all pay for it. I still see SOA's from bank advisers where it's just a blatant product flog, roll your super to our in house product, index option so the fees are lower, replace all existing insurance even if it's on a level premium, with the in house insurer. They're a disgrace and the advice they're putting out is an embarrassment to the industry and the reason we're in this mess in the first place. It'd be great if they actually audited some of the smaller advice firms out there to give them an idea of the type of advice professional Advisers are producing, not professional sales people.

Well articulated Agent 86, pity you are not a spokesperson for either supposed member bodies, the FPA or AFA!!

Add new comment