Life/risk focused dealer groups Clearview and Synchron are calling for extensive modelling to be carried out before any move is made to implement the recommendations of either the Financial System Inquiry (FSI) final report or the Trowbridge Inquiry.
Synchron director, Don Trapnell, has warned against knee-jerk implementation of the Trowbridge recommendations, claiming that they ought represent only a starting point, while Clearview’s submisson responding to the final FSI recommendations warned that recommendations made by the FSI and the Trowbridge Report, which proposed mandating level commission payments and/or heavily capping initial advice payments and commissions, were excessive and would lead to undesirable outcomes for consumers and financial advisers.
“Changes to adviser income structures must be carefully assessed in terms of their likely impact on incomes and how advisers can or will likely respond,” the submission stated.
While acknowledging that there needed to be a review of the life insurance industry and that change is necessary, Trapnell said there needed to be modelling undertaken to fully understand the consequences.
“The Report marks a starting point, however before we knee-jerk to implement such wholesale changes, we must ensure they actually do benefit consumers and are meaningful,” he said.
Trapnell said what needed to happen next was “a strict modeling process that demonstrates to government and regulators the real effect of the changes on consumers, advisers and small advice businesses”.
“We believe the Report missed a golden opportunity to conduct this modeling before handing down the recommendations,” he said.
Trapnell said his company was concerned that, as they stand, the Trowbridge recommendations would mean small business advisers would earn less than the cost of production, forcing them out of business and a whole range of people from their businesses onto the job market.
“The Report suggests that businesses will recoup losses in a few years’ time,” he said. “Small businesses simply cannot withstand losses for that period of time and would be forced to shed staff and cut costs simply to survive.”
Trapnell claimed that if the recommendations were implemented, job losses, both direct and indirect, suffered by Synchron practices alone would number around 500 people.
