The newly re-elected Morrison Federal Government will be subject to a united approach from the Financial Planning Association (FPA) and Association of Financial Advisers (AFA) on the key question of the future of life/risk commissions.
The AFA and FPA confirmed to Money Management their establishment of a Life Insurance Task Force, directly aimed at providing a single voice to the Government on what the advice industry believes should happen when the Life Insurance Framework (LIF) runs its course and is review by the Australian Securities and Investments Commission (ASIC) in 2021.
Formation of the taskforce was confirmed by both FPA chief executive, Dante De Gori and AFA chief executive, Phil Kewin, who said they believed it was important for the two groups to work collaboratively on the important issue.
Kewin said the two organisations were collaborating to ensure that the Government was receiving a consistent message.
De Gori said that much had been learned from the united front presented by the mortgage broking industry in defence of mortgage broking commissions.
“We want to deliver a common message and a signal that the two major bodies in the sector have come together on this particular issue,” he said.
The intended close working relationship between the FPA and AFA on life/risk commissions came in the wake of the two organisations joining together with the SMSF Association with respect to establishing and funding a code monitoring body under the new Financial Adviser Standards and Ethics Authority (FASEA) regime.
Comments
My only question here is what if the result of any review has already been decided? In that, what if the desired result is to increase premiums, issue policies with unfair terms, cut commissions to ZERO and expect consumers to be under insured or pay dearly for advice on top of a premium? Yes. What if the agenda by this government who appear to be in the pockets of the members of the FSC have already decided the outcome it seeks? Have we forgotten about the ASX bounce for institutions on Monday following the election of this government? Watch this space folks. The current government will be of course happy to hear our views. They will choose thought to not listen. Its about the consumer and not merely about commissions. Doing the same thing over again expecting a different outcome has not worked so far and will not work going forward. FPA/AFA - wake up for Gods sake
Well done FPA and AFA.
Maybe Dante finally understands how poorly viewed the FPA are by its members and the wider industry, and has to eat humble pie and join with the AFA who is at least trying to represent it's members interests.
Being associated with the AFA will do nothing positive for the reputation of the FPA, particularly on this matter. A big step backwards in any move to becoming a profession.
'Because the FPA has been the knight in shining amour? Do me a favor - am I the only one who noticed the speed of the finance broker's reply to the HRC recently? all 3 of their associations formed a coalition within minutes one could say and put the members front and center to protect businesses and clients alike....I hope this unity ticket between AFA/FPA isn't too late....I'm certainly looking to visit my federal MP asap
What a pompous comment!
Hi Joseph, are you referring to mine or the original one that I commented upon?
I was referring to the comment (Being associated with the AFA will do nothing positive for the reputation of the FPA....) that you commented on.
The conversation thread on this website does not represent that as clearly.
i thought so, cheers - your comments below spot-on mate
Good to see AFA & FPA working together on a lot more issues. After the FASEA cull has slimmed down adviser numbers and standardised everyone on a broad based level of knowledge, it may be time for a merger.
I certainly agree that the mortgage broker industry bodies put the AFA and FPA to utter shame compared to how ours dealt with the LIF. My question is what exactly is the common message and outcome the AFA and FPA want? And why are they not saying it?
The insurance companies are in a panic over the potential loss of commissions because they know business will dry up (worse than the reductions they are already experiencing). But these same insurance companies are also trying to lobby for the current unworkable LIF commissions to remain.
Lets remind ourselves of the past:
1. ASIC only reviewed 202 files of known churners and even then had to admit that hybrid commissions resulted in a good outcome. 202 files was a ridiculously low number of files to check and they were targeted anyway. Our industry bodies did nothing.
2. The FSC as a cartel created the current LIF commission rates for their own financial benefit knowing full well that lapse rates were in fact not an issue for 95% of honest risk advisers. Our industry bodies do nothing.
3. After the LIF was passed and the same FSC members provided lapse data ASIC admitted that churn was in fact not an issue to the 95% of honest risk advisers. Our industry bodies did nothing.
4. Since the LIF was passed all of the FSC cartel members have been increasing premiums on existing customers at unprecedented rates whilst offering discounts to new customers only and trying to created a churn issue that was not there in the first place. Our industry bodies did nothing.
5. FASEA! Need we say more? Our industry bodies did nothing.
6. Both the FPA and AFA were and are still heavily funded by the same FSC cartel members. Our industry bodies acted on behalf of them and did nothing.
My further questions:
1. Given this history lesson in corruption how can we have any assurance that the FPA and AFA will act in the best interest of advisers and customers?
2. Why are they not lobbying for a sensible and workable commission system e.g 80/20 with a one year clawback?
3. Why would you expect any adviser to commit to FASEA if they cannot afford to continue to write risk business anyway under the current and totally unworkable LIF rates.
If the AFA, FPA and even the insurance companies want to see a robust risk industry that will ultimately benefit customers they need to be confessing the past and lobbying not just for commissions to stay but for sensible and workable rates. Otherwise they are just wasting their time. Again!
Best comment ever above.
Let's face it FASEA was always about culling advisers for some ulterior motive and whether Insurance company (FSC) or industry super fund, it doesn't really matter anymore. Most advisers in the insurance industry won't exist in 3 1/2 years time.
Why the government won't just do what is right is beyond me. Small business in this country is doomed.
Mortgage Brokers were successful in getting the government AND opposition to disregard the Royal Commission's recommendation to ban upfront and trail commissions because the public would have been worse off and winners would have been the big banks.
Mortgage Brokers succeeded because their two main associations worked TOGETHER and got the support of small banks and non-bank lenders both in terms of funding and resources.
Can the AFA and FPA PLEASE work together with the insurers to meet with the Treasurer Josh Frydenberg and the Financial services ministerial team to help them/ get them to understand that the logic is identical when it comes to the Royal Commission's recommendation to ban Personal Insurances commissions because in this instance the big winners will be the superannuation funds whose insurance cover is typically more expensive and provides less cover and the losers will be the consumer who is not willing or unable to pay a fee for service for good financial and risk advice.
Various insurers individually putting up with whitepapers to state why banning commissions is bad for the public, has limited effectiveness.
The FPA rolling over and saying "we support the Royal Commission's recommendations" is counterproductive to the cause.
What is needed is a united effort led by the two main associations with the financial and resource support of insurers, to help the government understand the harm that banning insurance commissions will cause and why the Royal Commission's recommendation recommendation to ban upfront and trail commissions is NOT in the public's best interest!
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