Ban commissions, cross-sell say industry funds

All commissions and other forms of conflicted remuneration for the sale of retail life insurance policies should be banned, according to the Australian Institute of Superannuation Trustees (AIST).

What is more, the industry funds body wants an end to the regime which allows the banks to cross-sell products to employers.

In a submission to the Senate Economics Committee inquiry into consumer protection in the banking, insurance and financial sector, the AIST claimed “all exemptions, gaps and loopholes” which it believes are utilised by the banking industry to cross-sell should be closed off.

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“A clear signal should be sent to the for-profit side of the financial services industry by removing exemptions, gaps and inconsistencies,” it said.

The AIST submission runs directly counter to that of the Financial Services Council which (FSC) specifically acknowledged industry fund allegations but said this represented “significant public commentary, unsupported by evidence that inducements are offered by the superannuation sector”.

The FSC said the allegations were simply not true that “a recent, comprehensive review by ASIC and APRA confirmed that there was no evidence of inducements being offered”.

The AIST submission urged that, “the numerous exemptions from the regulatory framework for superannuation currently afforded choice products and investment options, platforms and legacy products should be removed to ensure that all superannuation fund members are equally protected”.

“As part of the implementation of an industry funding model for ASIC, risk metrics should be used to assess the relative risk of industry sub sectors to better understand the relative risks of for profit versus not-for-profit subsectors and levy sub sectors appropriately,” it said. “Licensees should be required to report to ASIC and publicly on the process, progress and outcomes of all review and remediation programs.”

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Yes, of course advisers should work for nothing. It's only fair to the 'not for profit' sector, as they all work for nothing don't they? Everything is fee free with Industry funds isn't it? No commissions paid to them from insurers.

The sanctimonious bleating of the hypocritical "left" The only people to win from such a stance will be the industry super funds with their over priced, substandard policies. But I sure all the commission they will earn from the insurers will flow back to their members............

Lets ban 'not for profit' organisations that have recognised they cannot compete in the advice space, but think locking the doors is the way to grow a business.

Because most Industry Super Funds enjoy a monopoly arrangement, then all salaries for Industry Super Fund field reps & internal Industry Super Fund advisers should be banned as well.

Firstly, ban commissions (and any other termed incentives) paid from insurers to institutions like ISA for putting their members in the group policies, then they may be taken seriously.

Ha ha ha ha,
ha ha ha ha,
puck you, hypocritical ISA!

I must have missed something here. It's been illegal to pay commission on life products in superannuation for at least 2 years.
Why don't we just ban advisers from the risk insurance space and let direct marketing take care of the needs of the consumer.
Of course you would need to ban commissions paid to Real Estate agents, Mortgage brokers, Car salesman. Why stop there, lets not pay people who sell clothing. Just because the retailer has built in a profit figure that means that he will be around tomorrow provided the salesperson sells enough of his product and is adequately remunerated for their labour. It may well be a salary but if you called it commission, a rose by any other name, how long do you think the salesperson would be employed if they didn't sell sufficient product ?

Not very long I suspect, bu,..t are any of these positions any more conflicted that an insurance adviser ?

Lets cap the salaries these not for so called profit thieves pay to themselves

Im OK with forgoing a commission on Insurance... It's OK because I will just take a "profit-share rebate" which is the same thing the Industry Funds receive.

Yep - everyone go to work for no income. It's conflicted, because yo get paid to turn up.
If you fail to turn up, you don't get paid. THAT'S conflicted!
Who are these drones? Seriously, what planet do they live on?

Knock-Knock, who's there, ban commissions.....sorry thought this was a joke?
So ban commissions where consumers have a choice and are informed of these, but its ok to keep group policy commissions or kickbacks where consumers have no choice or aren't informed.
C'mon, we can all laugh now, it is a joke right?

Lets try something radical. How about we have one set of rules across each product and service that everyone has to abide by and no exemptions or carve outs or hiding behind definitions or political or institutional sweetheart deals.

Industry Funds are run for the Unions and the LABOR PARTY. Millions of dollars in MEMBERS' fees go to Unions which then run propaganda for the Labor Party or make donations to the LABOR PARTY. Also Super Fund Liaison Officers eat up money from the Industry Funds, and for what purpose?
Has anyone seen publications of the rewards paid to Industry Funds by Insurance Companies for the Life Business placed? Must be worth Millions and Millions. Are these undisclosed COMMISSIONS?? Why does ASIC not pursue this RORT on behalf of MEMBERS??? MEMBERS deserve a fair go!!!!!!
There is no integrity being shown by Industry Funds by making such proposals.

When banning commissions was first mooted i.e. at least as early as 2009, my first reaction was how would advisers get paid for their work.

The situation with insurance is quite different than with providing Investment Advice, see point 2 below

Point 1, everyone deserves to be paid for the work they do, no exceptions! To do otherwise is and should be an anathema to everyone.

Point 2 that everyone seems to ignore is that fee for service is not a viable replacement for life insurance commissions. The reason was and still is very few people amongst will pay say $2000 for a risk only financial plan and then pay premiums at a similar level.

Point 3 with all the extra costs advisers face, licensee fees, education and training, PI, office costs, support staff etc, banning commissions for advice would result in advisers providing their services at a loss. That would be OK if they were remunerated by Government (being the only non conflicted party apart from clients themselves), but that is not a realistic solution for a range of reasons including competition and culture. What would actually happen is that clients are unlikely to be covered properly.

Point 4 and this is only because IMHO the AIST has exceeded its charter to talk on issues outside of superannuation and wants to ban all retail insurance commissions. However they have a point because if retail commissions were banned without corresponding banning of commissions outside super will skew the advice provided because all other things being equal everyone will seek to be paid. That is non super may be recommended even though it may not be most the appropriate recommendation for clients.

I would like to see some realistic suggestions from the Super Trustees and others have to remunerate advisers appropriately for their work in a way that is non-conflicted and affordable for clients.

Some ideas that come to mind are

* allow tax deductions or rebates for all life insurance premiums.
* allow superannuation funds to pay for non super insurance premiums (at least for a few years) when clients cannot afford the premiums. This typically occurs when clients commit to buy a house and very rarely have enough spare cash flow to pay for insurance.

Lastly with all its problems where clients pay for adviser remuneration from the premiums of implemented insurance premiums as far as I know commission is still the most effective way for advisers to be paid for their work.

If someone in Government is listening, please hurry up an ban life commissions so that some of these dinosaurs give it away and consumers of advice can stop being sold product.

It's obvious these people are not in their right minds. Selling insurance is just like selling any other product. And those products are manufactured and sold with a wholesale and retail price. Within that range there is provision for profit, some of which is forgone to pay salespeople a commission for selling the product.
This is pretty simple logic. What is it these people don't understand.
Conflicted income is being forced to turn up for work or not get paid. At least if you're a union member!

Jason you sound like an ISA plant or else a narrow minded, ignorant, sanctimonious manky tonk - which one, son?

Joe, I'm a consumer of advice sick of dealing with conflicted dinosaurs like you that often can't even acknowledge their commission income represents a conflict of interest, can't truly put their clients first and want to point the finger at others rather than take a look in the mirror. You can choose to be a leader in the move away from commissions and conflicted advice or go the way of the dinosaurs. So which is it, Grandpa?

OK Jason,
Since you think you have all the answers, that the dinosaurs don't ,
1.Which life company would you pick for your risk insurance
2. Would you pick the one with the cheapest premium ?
3. How can you tell whether one contract is better than another or in the event of a claim, you might have to engage ACA, 60 Minutes or a good lawyer to get paid.
4. How much would you be willing to pay an adviser for his/her time, for the time spent to provide you with the right advice ?
Would it be $100 per hour, $200 per hour or maybe because of your generosity of spirit you'd pay $300 per hour.
5. Now here's the kicker to whatever answer you gave in point 4, assuming you're an Olympic athlete,.... from the first interview of gathering client data, the preparation of a document, the presentation and completion of an application and lodgement can take at least 10 hours.
Now given, that even with a premium of $2000, less the rebate of 30.0% (viz $600) your premium is now $1400 + an additional fee for service of $1000, or $2000 or because your so generous $3000 on top.
Sport, you have to be an ISA plant because you're not residing on the same planet as the rest of us who actually work in the business where 99.9% of advisers put the client interest first second and last. Being paid commission has nothing to do with the process because by and large most companies pay the same level of commission.
It's probably fairer than the fee for service model you want because how conflicted is the fee for service model when the hourly fee can be variable and how do you verify billable hours.
You don't need a ticket to Disneyland, you're already there !

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