The Australian Securities and Investments Commission (ASIC) has applied the brakes to work it is doing on life insurance advice and grandfathered conflicted remuneration to help financial advisers navigate the extraordinary times being generated by the COVID-19 pandemic.
In a question and answer document issued advisers and licensees on Friday, the regulator said that to reduce the regulatory burden on financial advisers, it was:
- Delaying work on life insurance advice. We will not ask you for client information or for your client files at this time; and
- Delaying work on grandfathered conflicted remuneration, which we commenced on direction from the Treasurer. We will not ask product issuers for data at this time.
ASIC said it would be recommencing this work at a future date but that, “in the meantime, we expect product issuers to turn-off their arrangements as soon as possible and by no later than 1 January, 2021”.
“All rebates and/or reductions in fees should be passed on to consumers as quickly as possible. We have communicated separately with product issuers about this.”
In a further measure, the regulator said it would be allowing additional time for industry to respond to ASIC notices.
The ASIC document also makes clear to advisers and licensees an element of flexibility around the delivery of advice provided satisfactory records are kept and noted that the Corporations Act allowed for delayed financial services guides (FSG) and statements of advice (SOAs).
On the question of life insurance, the document stated: “ASIC is currently monitoring developments in the life insurance industry, including the possible introduction of exclusions for pandemic cover for new policies.
“The situation is moving rapidly, so you should be cautious about recommending replacement cover to your clients during this time. Most consumers that currently hold retail policies should be covered for pandemics.”
Comments
See AFR today for AMP announcement on end of commissions about 15 May. ASIC probably loving that and no sympathy for Advisers from the public.
Nothing to do with the pending sale to Resolution right? Except AMP get the benefit when transferring the business through a better sale price?
So that's the end of 4x or any BOLR multiple on that income. Class action lawyers probably won't even understand the issue. Just screwed over all your Advisers AMP by holding up the BOLR process until this came out.
The Fed Govt is spending $200 billion in propping up businesses, but is still quite happy to see financial advisers go under. It's insane.
Shameful that work on grandfathered commissions is being watered down yet again because of the burden on advisors. What about the burden on the clients whose money it is?
For many clients, grandfathered commissions enable them to access professional advice and assistance at well below market rates. Once grandfathered commissions cease, these clients will be effectively orphaned. If they want an adviser to assist them they will need to sign up to a complex and expensive fee for service arrangement.
Commissions are not the universal evil that various self interested parties portray them as. There are many situations where commissions work to the consumer's advantage.
Ok, Advisers might be unpopular after the RC but you don't mind paying commissions on;
- Tattslotto Powerball & Ozlotto tickets (Newsagent comm is 10%)
- Real Estate Sales AND Property Management
- Mortgages
- Mobile phones
....the list goes on.
You just object to Advisers getting a commission right? How informed of you.
Intra Fund Advice Fees - charged to all, it is not actually Advice therefore does not need to satisfy Best Interest Duty, is charged ongoing and does not actually require Advice or Service to be delivered - you referring to that?
Agree with Steve totally. Financial advisers are now needed more than ever. We are probably expected to work for free because of the financial stress in the rest of the community. ASIC's move to put the brakes on is far too late for me. And it's a pity Karen is not aware that the commissions which were being paid by product providers came out of their own funds, not the client's money. The Industry Super Funds were very clever with their advertising vilifying financial advisers, but it was all lies.
This has no benefit for advisers just the opposite. We need the work done on Life insurance now. We need ASIC to admit they got in wrong again, just as they did after the LIF was passed. We need the FSC and it members held accountable for their dodgy detailings in getting the LIF passed. We need it shown that since the LIF was passed the FSC members have increased premiums on existing customers and caused higher lapses and higher underinsurance. We need it shown that they tried to encourage churn by discounting new business premiums.
By delaying the FSC and ASIC no doubt will try and blame COVID-19 for the disaster they created with the LIF which had already happened before the pandemic.
Regulatory cost of running financial practice on top expenses is now prohibitive for boutique practice ?Administrative burden too much time to take a break maybe
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