The Financial Planning Association (FPA) has rejected claims that it did not consult with members regarding changes to life insurance commissions and said the claims overlook publicly released statements made by the FPA.
FPA chief executive Mark Rantall said its response follows claims by the Association of Independently Owned Financial Planners (AIOFP) that did not include all the relevant and correct information surrounding the Life Insurance Framework.
Rantall said the first discussions around life insurance commissions began nine months ago after the release of ASIC’s report into life insurance advice but the AIOFP had “only now decided to contribute a life insurance proposal to government”.
Rantall said this proposal — released last week by the AIOFP — matches the FPA Life Insurance Blueprint which was released in May of this year (see table below) after having been put to the FPA’s 11,000 members for consultation and discussion.
According to Rantall more than 1000 members took part in the consultation process, with over 70 per cent supporting the FPA’s proposals.
He also rejected claims the FPA’s proposal was shaped by institutional interests stating “that only FPA members who are CFP professionals and Financial Planner AFPs have a vote; that is, only practitioner members have voting rights, not Corporates or Managers”.
While the combined proposal submitted by the FPA, Association of Financial Advisers (AFA) and Financial Services Council (FSC) differed from the initial FPA proposal Rantall said the three groups had been urged by the Federal Government to submit a joint solution or face the prospect of level commissions as recommended by the Financial System Inquiry.
Rantall said the FPA was continuing to work on the claw back arrangements with his comments echoing calls by AFA chief executive Brad Fox for more clarity on claw-back around policy lapses beyond an adviser’s control.
“We are aware this is a significant change for specialist risk writers and it will cause some pain. This change will happen but we are still aiming for longer transitions and better claw back provisions,” Rantall said.
Life Insurance remuneration proposals released by Industry Associations
|
Proposal provisions |
Initial FPA proposal |
Initial AFA proposal |
FPA/AFA/FSC proposal |
AIOFP proposal |
FSI proposal |
|
Up front commissions |
80% |
80% |
80% to 60%* |
70% |
Level |
|
Ongoing commissions |
20% |
20% |
20% |
20% |
Level |
|
Clawback period |
2 years |
2 years |
3 years |
2 years |
– |
|
Transition period |
3 years |
2 years |
3 years |
2 years |
– |
* over three years from 1 Jan 2016
