Give clients choice between commissions and upfront fees

Clients should be presented with the choice between commissions and paying upfront fees, and this will help bring back lower income clients into advice, according to the Association of Financial Advisers (AFA).

Speaking at the FSC Life Insurance Summit, Phil Anderson, AFA acting chief executive, said: “We know there are emerging problems there, we know it’s very difficult for people on lower incomes to access advice because financial advisers are no longer able to work with those people who are only going to generate smaller premiums as a result.

“But this gives us the opportunity to ask what the client wants – give them the choice between commissions and paying an upfront fee.

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“We know from experience that clients in these situations choose the commission option.

“We would really like to see existing clients listened to as part of the process, because unfortunately they’re the missing voice in all of these debates that we have about regulatory reform.”

Anderson said the move to put the Life Insurance Framework (LIF) review under Treasury was a positive.

“The LIF review will still be done, they’ll still be getting those advice files in and they will still be looking at those advice files,” Anderson said.

“But in terms of the assessment of the future of commissions, which is the core issue of the LIF review, they have to look more broadly, they have to consider things like under insurance, they’re also going to consider things like access and affordability of advice.”




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I give my clients the choice now. Their preference is generally quite predictable based on how much their premium is. Under $10K premiums they choose commissions. Over $10K they choose fees.

It's definitely a positive move. Prior to this change ASIC was basically going to compare files purely based on the apparent 'quality' of the advice, so we were still at the mercy of a random sample of files. Now there's no way Treasury will come out with a recommendation to reduce or remove commissions if they have to take into account cost and affordability to clients. It'd be naive to think they would recommend an increase in commissions back to say the previous 80/20 hybrid levels but perhaps some watering down of the SOA requirements might mean we can provide insurance advice in a profitable way.

An insurance only SOA should be no more than a few pages containing a needs analysis, the recommendations and Adviser remuneration.

It’s a shame it took a pandemic and the government debt to sky rocket for them to see how much the pool was drying up. They want people insured so they don’t end up on the public purse, they can’t afford that sh*t any longer! It’s with a very optimistic, albeit small, glimmer of hope that I see some potential for our industry to look a bit better than it did 5 years ago. Who knows though, a change of Gov’t and it’ll all be repealed and we will be back on the scrap heap

Reducing an SOA to 5 pages will do very little in assisting advisers to run their business financially
We have had commission reduced by 40-50% over the past three years but ASIC levies increased PI costs licenses fee increases and outrageous exam requirement at costs of $15 k plus not to mention time lost having to study and sit them have “drowned” any positive reform this will have
When advisers are eventually noticed as the saviours of this burocratic mess and are treated as such then and only then can we say headway is being made
Commissions returning to 80/20 WOULD be a good start and someone for Gods sake sort this FASEA education mess out We don’t all want to be fully fledged financial planners

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